Students dive into debt

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Students weigh the positives, negatives of taking out loans after paying the price

For many American college students, attending a university means accumulating both knowledge and thousands of dollars in student loan debt.

The Institute for College Access and Success (TICAS) released their Project on Student Debt report for the graduating class of 2013 last week. The report showed approximately seven in 10 (69 percent) seniors graduated from public and private nonprofit colleges with student loan debt.

The average amount of debt was $28,400, which represents an increase of two percent from 2012. About 80 percent of student debt came from federal loans, which generally have lower interest rates and more protection for borrowers.

Miami reported 54 percent of graduating seniors had student loan debt and the average amount was $27,181.

Miami is located in the Midwest, a region which, along with the Northeast, typically has higher debt than the rest of the nation.

Ohio has the 11th highest student loan debt (68 percent) of the 50 states with an average of $29,090, slightly higher than the national average.

TICAS reports information on both public and nonprofit colleges in its report, but not for-profit institutions. Public colleges like Miami University are funded to varying degrees by the state in which they are located. Private nonprofit colleges are run by a Board of Trustees independent of owners or shareholders, whereas private for-profit colleges operate more like a business and focus on providing both an education and returns to shareholders.

Although the amount of debt at Miami is below the national average, if you compare it to other public four-year colleges, excluding nonprofit colleges, Miami students have slightly higher debt (68 percent of students at four-year colleges had debt and the average was $26,000).

Program Director for TICAS Matthew Reed said a variety of factors can play into both the increasing levels of debt and the variation among institutions.

"College costs have risen generally over recent years," Reed said. "At the same time, available grant aid from federal, state and college sources has not necessarily kept up, and when that happens, some students and families turn to borrowing. Another factor is the percentage of students in attendance who are low-income. They tend to borrow more than high-income students."

Reed said a higher percentage of students who attend college in Ohio are low-income compared to national percentages, and the costs of public institutions in Ohio are higher than public institutions nationwide, which may contribute to the higher levels of debt in Ohio.

Director of Student Financial Assistance Brent Shock said another reason is the decrease in Ohio state grants in recent years due to budget cuts.

Reed reported one other reason for the variation in debt levels nationwide.

"One factor is the mix of students at nonprofit colleges and public institutions in each state," Reed said. "Nonprofit colleges tend to have higher costs overall. So if you look at the lower debt states, if more students are attending public colleges and the cost of attendance is relatively low or grant aid is relatively high, those can be factors for the low debt levels."

Shock said debt levels at Miami have grown in recent years, but modestly compared to other four-year public institutions in Ohio.

"In the last five years, the overall student debt has increased by 2.3 percent," Shock said. "During that same period of time, Kent State University debt has increased by 18 percent, University of Cincinnati debt has increased by almost 10 percent, Wright State by almost 22 percent and Ohio State by almost 20 percent."

According to Shock, the higher rates of growth at other Ohio institutions can be attributed to campus-specific factors.

"[The rate of growth] varies by campus," Shock said. "One reason debt at other campuses might have grown more rapidly is that they have more aid-eligible students. We've held pretty constant with that figure."

Senior Samantha McCauley said she took out loans to attend Miami. Although she was happy with her decision to borrow in order to attend school, she said the reality of paying back loans has started to hit her.

"I knew that I wanted to go to Miami and I knew my parents were going to help me as much as they could," McCauley said. "But it doesn't even turn into a real thing until you graduate. It was a conscious decision to take out loans and I knew what I was doing, but it was one of those things where I thought I would worry about it later."

Despite the stress of paying back loans, borrowing gave McCauley the chance to make the most of her college experience.

"I was able to study abroad whereas I would never have been able to have that experience and I can't imagine my life without it," McCauley said. "I also can't imagine going to a different school than Miami. My time here has made me who I am, but my parents couldn't afford it up front and I work two jobs and still couldn't have afforded it."

But McCauley said there are disadvantages to taking out loans as well.

"It's very limiting as far as plans after school," McCauley said. "I have a spirit of adventure but in six months [after the grace period], I'll be paying the interest back. When that fake number becomes a reality, it can be limiting and terrifying."

The grace period is an amount of time, which varies depending on the loan, during which students do not have to begin making payments after graduating or dropping below half-time student status. Most federal loans have a grace period and private loans may also have one depending on the loan the student takes out.

Shock said even though paying back loans is a burden for many students who choose to borrow, of all things to borrow for, an education pays the most dividends.

According to the TICAS report, people with a college degree have an unemployment rate that is almost half that of people who have graduated high school and they continue to earn higher salaries.

"I'm bothered by the media when it says things like student loan debt now exceeds credit card debt," Shock said. "Those are two different things, and if you have to borrow, there's no greater investment than borrowing for an education."