New Report Examines College Student Debt

Indebtedness of recent graduates from four-year public and private nonprofit colleges is the focus.

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The Project on Student Debt has released its Student Debt and the Class of 2010 report. As in previous reports, it provides an overview of the student debt situation nationally and then breaks down the information by state (it even has a neat interactive map) and by college. The report closes with some notes on private loans. We can't think of a better way to do it, so we'll take you through the data the same way.

The national picture: First, it's important to recognize that the report hones in on the cumulative student loan debt of recent graduates from four-year public and private nonprofit colleges. It does not include for-profit colleges because so few of them report the necessary student data.

[Learn about the impact of President Obama's student loan plan.]

However, as the report notes and we have previously reported, students at for-profit colleges borrow more (and are more likely to borrow) than students at public and private nonprofit colleges. (It should also be noted that borrowers who attended public four-year and private, nonprofit four-year colleges are more likely to repay their loans on time without resorting to deferment or forbearance and less likely to default than students at two-year public colleges and two- and four-year for-profit colleges.) According to the report, for example, 96 percent of graduates from for-profit four-year colleges took out student loans and they borrowed 45 percent more than graduates of other four-year schools.

With those caveats in mind, Student Debt and the Class of 2010 calculates that two thirds of college seniors who graduated from four-year public and private nonprofit colleges in 2010 had student loan debt that averaged $25,250. That's up 5 percent from the 2009 average of $24,000 and is similar to the average annual increase over the last few years.

Student debt by state: The report provides the average debt and the percentage of students taking out student loans for every state. As in previous years, the state averages varied greatly (from $15,500 to $31,050), with the high-debt states largely in the Northeast and Midwest and the low-debt states mainly in the West. For example, students in Utah ($15,509 in average debt) and Hawaii ($15,550) had the lowest average debt while students in New York ($26,271) and Rhode Island ($26,340) graduated with the highest average debt levels.

[Read more about the average student debt, now at an all-time high.]

According to the report, this geographic diversity may be explained by the fact that a disproportionate number of students in the Northeast and Midwest attend private, nonprofit colleges compared to students in Western states where a higher percentage attend public colleges and universities. So if you grew up in the Northeast or the Midwest and don't want to go to college in Utah (though you should still visit beautiful Zion National Park someday), you may want to consider going to a public college in your state rather than a private one to save money.

[Find out how to qualify for out-of-state tuition breaks.]

Student debt by colleges: Average debt varies even more between colleges than it does between states. The report does not rank individual colleges because the data (which depends on self reporting and may not be updated) is not reliable enough. However, it does list colleges at the high end of the scale (with an average reported debt ranging from $29,800 to $45,350) and the low end (with an average reported debt ranging from $950 to $8,700).

Students should not make the mistake of assuming that looking at tuition and fees alone is enough to assess whether a particular college is affordable or not. Actual student debt levels may vary greatly even among colleges charging similar amounts in tuition and fees because of local living expenses, the availability of need-based aid and financial aid policies.

For example, the report lists Pomona College, Princeton University, Williams College, and Yale University as colleges that charged more than $30,000 for tuition and fees in 2009-2010, but whose graduates had, on average, less than $10,000 in student loans, thanks to financial aid policies benefiting low- and middle-income students.

To understand the "real" costs and affordability of a school, prospective students should look at look at tools like net price calculators, which have been required on all college websites since Oct. 29, 2011, and make their own calculations of how much they actually will have to pay. The Student Loan Ranger will also be taking an in-depth look at net price calculators in the near future, so stay tuned.

[See four things to know about net price calculators.]

About those private loans: According to the report, at least 22 percent of all student debt for the class of 2010 at public and private nonprofit four-year colleges was composed of private loans. We've touted the benefits of federal loans before, and the authors of this report note that private loans are one of the riskiest ways to pay for college because they typically have higher costs and provide minimal relief if you are struggling to meet your monthly repayment obligations.

Interestingly, the proportion of debt that stems from private student loans varies widely across colleges, perhaps in part because of problematic financial aid practices such as not providing counseling when students apply for private loans or including private loans in the college's initial financial aid package. The report provides a list of colleges that have both high overall borrowing and a high share of debt from student loans. Whatever college or graduate school you choose to attend, make sure you take the initiative and avoid private loans if you can.

[Get more advice on how to pay for college.]

That's it for this week. Make sure you have the latest educational debt information by subscribing to our Twitter feed and following us on Facebook. And don't forget to attend our free webinar "Drowning in Debt? Learn How Government and Nonprofit Workers Can Earn Public Service Loan Forgiveness" on Thursday, December 1, at noon EST. Consider it an early Christmas present to yourself.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works's educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.