College is a good investment, but be wary of debt

The College Board has just released its annual Trends in Student Aid report, highlighting an issue receiving national attention: student debt. Like students and their families, we in higher education have serious concerns about college affordability and student debt, regularly monitoring and analyzing them to maintain quality higher education at a reasonable cost.

For the majority of graduates, the return on investment far outweighs the amount of debt incurred; however, some students do amass greater debt than they can reasonably accommodate. This is especially true for students who take on debt but do not complete college. It is important as we discuss solutions aimed at reducing student debt, that accurate data and context are considered. In particular, how do North Carolina graduates fare, and what are our colleges and universities doing to help address the financial burden?

The Brookings Institution reports that 40 percent of North Carolina college and university students graduate with no debt. In addition, a large proportion of student loan debt is actually incurred by students enrolled in graduate and professional schools rather than those seeking a bachelor’s degree. For the 6 in10 undergraduates who do borrow, the national average of student debt upon graduation is $27,000; and the average in North Carolina is lower at $25,000 according to College InSight. One can compare this amount of debt to the average price of a car – which will depreciate, while the value of a college degree will appreciate. But it is even more important to consider that according to the United States Census Bureau, individuals with a baccalaureate degree earn an average of $1 million more, in part depending upon their choice of career, during their lifetimes than individuals with only a high school diploma.

In North Carolina, federal and state grants are available to two- and four-year college students who have financial need. North Carolina’s 36 independent (private, nonprofit) colleges and universities also help keep their institutions affordable to a diverse array of students by providing significant amounts of student grants from the colleges’ own funds, raised through private philanthropy. Last year nearly $600 million in institutional aid was awarded to students, in addition to $160 million in federal grant aid and work study funds and $88 million in state grant aid.

Students can supplement their financial aid package with a variety of educational loan options. These loans often make the difference, in combination with federal, state and institutional grant aid, in a student’s ability to attend and complete college. The average student financial aid package at North Carolina’s private colleges and universities consists of 9 percent federal grant aid, 7 percent state and local grant aid, 60 percent institutional aid and 24 percent federal and private loans.

We in higher education continue to work to keep college costs down and raise additional scholarship funds for students. The use of student loans to pay for college has actually declined over the past decade, with more than a third of borrowers owing less than $10,000.

It is important to note that while college staff can counsel students on whether they should take out loans and how much would be reasonable, financial aid counselors cannot control if or how much, students actually borrow. Whether it is financial aid for which the federal government says a student is eligible or a private loan a lender agrees to make, the decision to borrow money and how much to borrow is a student choice – not a campus choice.

Careful packaging of grant aid by financial aid administrators has reduced the amount students are borrowing, and while we must be mindful of those who over-borrow, we must also recognize the opportunity responsible borrowing brings to many students.

Students and parents should work with financial aid officers to determine if borrowing is needed to help make a college education possible. Together they can package aid that meets the student’s and family’s needs without placing an unreasonable burden on future income. A college education is an investment. Yes, it is expensive, but the returns are proven: increases in the quality of life for graduates and their families and higher earnings over the course of their lives.

This story was originally published November 3, 2016 at 5:32 PM with the headline "College is a good investment, but be wary of debt."