Digging Deeper: Making Sense of Student Loan Debt in Texas

1. Digging Deeper: Making Sense of Student Loan Debt in Texas Jeff Webster, Assistant Vice President, Research and Analytical Services, TG Melissa Shook, Research Specialist, TG

2. Levels of support to achieve graduation goals High Free tuition Substantial need-based grants Need-based grants, work part-time Graduation Rates Loans and need-based grants Loans only Work full-time, attend full-time Low Work full-time, attend part-time

3. What we are going to cover?

4. Texas Context • Compare Texas undergraduates to U.S. undergrads (Fall 2007 only) • Differences largely stem from source of aid and enrollment patterns • Similarities may be due to low rates of persistence in Texas

5. Reliance on student loans 65% of student aid in Texas comes in the form of loans, compared to 55% for the U.S.

6. Source of student aid Texas students are much more likely to receive aid from the federal government. Texas students are much less likely to receive institutional aid.

7. Undergraduate enrollment patterns Texas has a much smaller percentage of students attending 4-year private institutions than the nation as a whole. A much larger percentage of Texas students attend community colleges.

8. Total college cost by school sector It is a lot more expensive to attend a 4-year private institution than a community college. Even though 4-year private colleges in Texas are less expensive than in the U.S., a lot fewer Texas students enroll in 4-year private institutions. Community colleges in Texas are more expensive than in the U.S., yet more Texas students choose them. The cost difference between a 4-year public and a community college is much smaller in Texas than the U.S.

9. Academic intensity Texas students are far less likely to attend school full time.

10. College GPA Texas students are more likely to have a lower college GPA.

11. Graduation rates 2 year schools in Texas have lower graduation rates than the rest of the U.S. 2 year schools have the lowest graduation rates per school sector.

12. Borrower rates • Identify the influence of school choice and the likelihood of borrowing • How demographics affect borrowing

13. Percent who borrow The difference between those who borrow in Texas and their national counterparts is statistically significant.

14. Source of loan The primary sources of student loans are the federal government and private lenders.

15. School sector • Community college borrower rates are low. • Borrower rates at proprietary schools are high, especially in Texas.

16. Academic intensity Part-time students are less likely to borrow, and Texas has a higher percentage of part-time students than the U.S. as a whole. Full-time Texas students are less likely to borrow than their U.S. counterparts.

17. First generation First-generation students are more likely to borrow (at least federal loans). Texas first-generation students are less likely to borrow than their national counterparts.

18. Hours worked per week Regardless of hours worked, Texas students are less likely to borrow.

19. Dependency Status Regardless of dependency status, Texas students are less likely to borrow.

20. Parental income (dependent students) Regardless of income, Texas students borrow less than their U.S. counterparts.

21. Race and ethnicity African Americans are the most likely to borrow. The biggest difference is among White students, where those in Texas are far less likely to borrow. Hispanics in Texas are more likely to borrow than White students, unlike the national statistics.

22. Grant type Texas Pell grant recipients are less likely to borrow than U.S. Pell grant recipients.

23. Summary • Texas students are less likely to borrow. • Nearly all students who borrow take out federal loans. • A third of borrowers have a private loan. • Borrower rates vary by school type • Part-time students are less likely to borrow • Texas Hispanic students are more likely to borrow than Texas White students.

24. Debt levels • The (National Postsecondary Student Aid Survey) NPSAS 2008: Snapshot of student debt in a given year. • MBI at the point a student leaves college gives a more complete picture of debt.

25. NPSAS key findings • Texas borrowing amounts are similar to U.S. borrowing amounts. • Texas full-time students borrow less from private sources than their national counterparts. • Texas “workers” borrow less from federal sources than their national counterparts. • Texas “students” borrow less from private sources than their national counterparts. • Texas White borrowers borrow more from federal sources than their national counterparts.

26. Median borrower indebtedness Award Year 2007-08. Source: SOSA 2010, p.60

27. MBI by school sector Award Year 2007-08. Source: SOSA 2010, p.61

28. MBI by enrollment status Award Year 2007-08. Source: SOSA 2010, p.62

29. MBI by Texas region Metroplex $12,317 Panhandle $14,395 East $11,000 West $8,259 Gulf Coast $12,691 Central $13,065 Rio Grande $7,125 Award Year 2007-08. Source: SOSA 2010, p.63

30. Summary • One year snapshot of Texas debt shows simple patterns of indebtedness to U.S. borrowers • Cumulative TG-borrower debt levels show steady 10-year increase • Large MBIs possible only where students have persisted (thus lowering the likelihood of default)

31. The Texas paradox • The majority of aid that goes to Texas students is in the form of loans. • Yet, Texas students are less likely to borrow than their U.S. counterparts.

32. How can this be? • One factor may be the choice of school. • Fewer Texas students attend 4-year private colleges (where institutional grants are common and borrowing is heavy). • A greater percentage choose a community college (where bargain hunters attend part-time and appear averse to borrowing).

33. Policy implications A low-income student seeking to trim costs in order to avoid debt faces a dilemma: • Risk borrowing, despite fears of being unsuccessful - OR - • Embark on a college path that, while less expensive initially, stretches the time to degree and involves greater risk of dropping out along the way

34. Policy implications (continued) • Perhaps the most telling statistical comparison from NPSAS 2008… • First-generation students in Texas = 39% of total enrolled • First-generation students in U.S. = 39% of total enrolled • Based on Texas youth demographics, one wonders where first-generation students went. • Perhaps either they didn’t gain access, or dropped out quickly.