MANKATO — After 41⁄2 years of college, Ashley Wall graduated from Minnesota State University in December 2010 with about $45,000 in student loans.
That breaks down to a payment of $175 per month over the course of 30 years. Whenever she can, Wall tries to make a bigger payment to shorten the loan term. But that’s difficult now that she’s taking on “grown-up responsibilities,” such as rent, utilities, groceries and a car payment, she said.
“What’s left of my paycheck after bills couldn’t possibly be put into savings; it’s used for getting through everyday life, like groceries and gas,” said Wall, marketing coordinator at Village Pointe Shopping Center in Omaha, Neb. “It’s really sad, but the American dream of owning a home, buying a car, getting married and starting a family has virtually turned to dust. All of those things cost money.
“And extra money, for a recent college graduate, is extremely hard to come by. And all of this is coming from someone who has landed a full-time, salaried job in her field.”
Wall is one of many Minnesota grads with tens of thousands in student debt, according to a recent study by the Institute for College Access and Success in California that looked at 2011 graduates nationwide.
Minnesota graduates have the third-highest amount of debt in the U.S. — about $29,800, compared to the national average of $26,600, according to the study. (Only New Hampshire and Pennsylvania grads had more debt.)
Among public schools in the state, MSU had the third-highest student-debt load: $29,415, which is greater than St. Cloud State University ($28,819), the University of Minnesota-Twin Cities ($28,407), and Southwest Minnesota State University ($26,394).
Why so much debt?
The average annual cost of tuition at the U of M is $11,287, according to a 2011-12 report by the Minnesota State Colleges and Universities system. That compares to $6,668 at MSU, which is 40 percent less than the U of M, and yet graduates from MSU had about $1,000 more in student loans, according to the study.
For undergraduates, federal low-interest loan programs include Federal Direct Loans, Federal Perkins Loans, and Federal Direct PLUS Loan (Parent Loan for Undergraduate Students), for parents of dependent students. All are awarded on a need basis, said MSU Vice President of Finance Richard Straka.
Higher-interest private student loans are sometimes taken out to help cover the variety of expenses associated with college life: tuition, fees, housing, books, computers, other equipment and cost of living.
Sandra Loerts, MSU director of financial aid, said it’s difficult to discern specific reasons why MSU students are graduating with a greater debt load than other schools. (Loerts’ figures indicate the average MSU student graduates with $22,600 in debt, although that only includes federal loans, not private loans.)
It’s possible MSU students take advantage of fewer scholarships than students at the U of M. Or, perhaps, MSU students qualify for more federal loans (awarded on a need basis) than U of M students because MSU students’ families are less affluent.
MSU students may be taking longer to complete their course work than students at some other schools, causing them to take out more loans over additional semesters. Or maybe they take out more private loans to help cover living expenses than students at other institutions.
But Loerts isn’t able to point to specific causes without comparative data for other Minnesota institutions, without specific studies that look at each of these possibilities at MSU, and without looking at the data that went into the study by the Institute for College Access and Success, she said.
“I would say that all of those are possible without knowing the data that was used,” Loerts said.
Craig Sanderson, MSU assistant director of financial aid, said the financial aid office does everything it can to provide loan counseling and make sure students are aware of how easily debt can mount.
“We are certainly well aware of the loan indebtedness. It’s something that we’ve been aware of for quite some time,” he said. “We are certainly some of the leading advocates when it comes to working with federal aid programs and state aid programs to try to assist students because we see this on a daily basis.”
Loerts said there are no hidden programs students may not be aware of in lieu of taking out loans.
“There really aren’t any other resources that students aren’t utilizing where they would have to borrow less,” Loerts said. “At a public institution, we are very limited in the dollars we have. ...
“What we do here is we encourage students to only borrow what they need, not necessarily what they’re eligible for.”
Non-traditional student Melissa Ridler said students have to make sure they’re being responsible with loans.
When Ridler attended South Central College in the 1990s and earned an associate of applied science degree in legal administration, she worked as a waitress to help pay for tuition and she took advantage of scholarships and grants.
Now back in school at MSU to pursue a bachelor’s degree, Ridler — a wife and mother of two who works full time at MSU in the Graduation Services office — is taking about nine to 12 credits per semester. By the time she graduates in a couple of years, she estimates she will have accumulated between $15,000-$18,000 in student loans, but she only takes subsidized loans (government pays the interest while the student is in school and for a six-month grace period afterward).
“I’m a huge couponer, so if I didn’t do that, I would probably need a ton more (loans),” she said.
The loans are needed on top of Ridler’s tuition waiver from working at MSU, which covers up to 20 credits per year. She also takes advantage of grants and applies for scholarships whenever she can.
Ridler said more students should consider employment while they’re in school, which not only helps with costs but builds work ethic, looks good on a resume and might even help connect them with jobs after college.
“Students need to take their schooling more seriously,” she said. “They like the idea of the loans because they can have a bit more freedom so they can do what they want to do.”
Ridler said part of the problem might be generational, having grown up with parents who wanted to give their kids more than what they had without making them work for it.
“There’s a lot of irresponsibility with the loans,” she said. “They haven’t been taught to be fiscally responsible.”
Loerts disagrees. She said the financial aid office makes sure students are aware of the responsibility of taking out loans and keeping them aware of their loan balances. The office also offers loan counseling.
“Our office does a good job of informing students what their loans are,” she said.
Loerts said the larger debt loads in recent years may be a reflection of students who lost their jobs, or students’ parents going through financial difficulty and can’t help out, among other reasons.
“A lot of it is tied to the economy,” she said.
Cost on the rise
Full-time students taking 12-18 credits who are Minnesota residents are paying $7,532 in tuition and fees this year, according to MSU Student Financial Services. The average cost of room and meals is $7,368, which makes the total annual cost estimate for attending MSU $14,900, according to the department. (Books and other supplies are not factored in.)
That compares to five years ago, during the 2007-08 school year, when tuition and fees were $6,058 and room and meals were estimated at $5,356, for a total of $11,414. That’s a $3,486 increase, or 31 percent, in five years.
Straka said the primary reason for the increase in tuition (about $1,360 or 26 percent since 2007-08) is due to reductions in state appropriations, and not so much expenditures. Going into the last biennium with the $5.8 billion state budget shortfall, Straka said MnSCU took its share of deep cuts as a result.
From the fiscal year 2008-09 to 2011-12, the state appropriations have gone from $4,393 per pupil to $3,274, which is a 25 percent decline.
“As you look at that, that’s a continuing picture of what’s happened in our state, but also across the country in higher education,” he said.
About 25 years ago, when Straka entered the field of higher education, he said the longtime traditional funding goal for higher education in Minnesota was for the state to fund 67 percent of the cost — which at MSU would be about $80.5 million of its $120 million budget.
“That’s more than flipped now,” he said. “The state is only picking up about 1⁄3. ... Tuition has certainly gone up, but the vast majority has gone to replace those state appropriations.”
Straka said he doesn’t foresee a turnaround.
“We could hope, perhaps, for a leveling or a slight change, but we’ll never come anywhere near the former 2⁄3 to 1⁄3 approach,” he said.
Straka said the MnSCU Board of Trustees met recently and is discussing more modest tuition and fee increases for next year, hoping to hold increases to 3 percent as one part of a three-part legislative budget request.
Still, despite the increase in cost of attendance, Straka said MnSCU universities are the most affordable in the state and “an excellent value.”
“(But) there will continue to be pressure to try to keep higher education as affordable as we can,” Straka said.
Chris Collins, student body speaker of the Minnesota State Student Association, said the student senate sends members to the Capitol annually to talk with lawmakers about the need to keep tuition costs down.
But, aside from that and also consulting with Straka, there’s little the student senate can do about the cost of tuition. What the senate does have control over are student activity fees, a budget formulated by the Student Allocations Committee and approved by the MSSA, Collins said, before being reviewed and finalized by MSU President Richard Davenport.
The senate, historically, has tried to keep fees down, Collins said, which can be difficult when most organizations want more money.
“Everybody wants to be able to spend a little bit more than they obviously have,” Collins said.
Aside from loans, numerous options are available to help cover costs at MSU, including various MSU scholarships or private scholarships, federal grants and work study. Work study awards at MSU, for example, range from $1,280 to $3,840 per year on average, according to Student Financial Services.
A tough economy
The Institute for College Access and Success’ study also indicated that recent college grads are entering a very tough job market, meaning repaying the student loans is even more difficult. The study showed the unemployment rate for young college graduates in 2011 was 8.8 percent, down from 9.1 percent in 2010.
Loerts reported that the average loan default rate for MSU students was 4.8 percent when looking at the 2009-10 figures.
Wall said she’s one of the lucky ones who was able to find a job in her field. And, looking back at her college career, Wall said she wouldn’t have done much differently. She took her general education credits at the less-expensive South Central College to avoid extra debt, and then she transferred to MSU.
She also doesn’t regret a costly study abroad trip to Australia that loans helped fund, she said. Overall, despite the mountain of debt, Wall said the value of her education is paying off.
“Absolutely it was worth it,” she said. “Not only do I believe that I wouldn’t be where I am without my college education, but the experience in itself was worth it. I learned to understand the importance of leaving home and having new freedoms. I met new people, new teachers, and propelled my knowledge to the next level.”
Still, Wall said, she was surprised to learn that MSU’s student debt average was so high. And, actually, it makes her feel a little better to know that she’s not the only one who will be making big payments for a long time.
“Sometimes, you think you’re the only one paying off debt, especially when you see your friends buying houses and cars and starting their families,” she said. “It’s something I think students need to realize and research before they pick a school. Taking out loans and using financial aid are great in the moment, but it’s what comes after — the struggle to grow up.”