The report "The Condition of Education 2013," recently released by the Department of Education and the National Center for Education Statistics, is a fascinating, if daunting, statistical deep dive into every aspect of secondary and postsecondary education in the United States.
Because it's the Student Loan Ranger's focus, we'll talk about the postsecondary side as it relates to student debt. But the whole report is worth downloading.
One of the first statistics that jumps out at the Student Loan Ranger suggests that postsecondary education is a big business and a growth business. Education accounted for a whopping 3.2 percent of the nation's gross domestic product in 2010 – up from 2.6 percent in 2000 – and total expenditures by postsecondary institutions increased 43 percent, from $338 billion to $483 billion, between 2000 and 2011, the report shows.
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Not only is it big business, it's big government. According to the report, the federal government provided one-third of the 2011 expenditures on education, totaling $181 billion. A massive $146 billion of this was as student financial aid in the form of student loans, grants, work study, etc.
It won't surprise regular readers to hear that most of this financial aid was in the form of loans. The federal government disbursed $108.6 billion in loans – which have to be repaid – to nearly 19.2 million borrowers, according to the report, compared with $37.8 billion in grants – which don't have to be repaid – to 10.5 million grantees.
These loan amounts have increased over time as well; in 2000, the report states, the federal government disbursed only $43 billion in student loans to 7.5 million students.
[Find out how the government calculates the cost of student loans.]
Put in context, then, a significant portion of the growth in education has been in the form of student loans that borrowers bear the burden of repaying.
That's not going well, data in the report reveals. To begin with, increasing numbers of borrowers are defaulting on their loans. In 2010, the two-year cohort default rate was 9.1 percent. That means 9.1 percent of the borrowers who entered repayment in fiscal year 2008 did not make a payment on their loans for at least 270 days – thereby going into default – sometime in the 2009 to 2010 fiscal years. This is nearly double the 2005 cohort default rate of 4.6 percent.
Serious delinquencies, borrowers who are at least 90 days past due on their loans, are also increasing. In 2003 only around 6 percent of outstanding student loans were seriously delinquent; that rate increased to 11 percent by the third quarter of 2012, the report states.
For students looking to reduce their need to borrow, the report's overview of net price, an estimate of the actual amount a student needs to pay, gives a good idea of where to look. Among four-year institutions, paying in-state tuition at a public institution is the best deal according to the figures in the report, with an average of $6,430 in total grant aid and an average net price of $12,280 for first-time, full-time students receiving aid.
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In contrast, the report shows first-time, full-time students receiving aid at private for-profit four-year institutions receive only $4,880 on average in grant aid and pay an average net price of $23,460. Students at nonprofit four-year institutions receive more grant aid, an average of $16,260, but still have to pay an average net price of $22,620.
Wherever a student chooses to go to college, it's important to note that as college costs continue to rise, so has the need for financial aid, ranging from federal loans and grants to state, local and institutional grants and private loans. In academic year 2010–2011, 85 percent of first-time, full-time undergraduate students at four-year, degree-granting institutions received financial aid, including a full 90 percent of students at private for-profit institutions, according to the report.
An overarching lesson students should draw from the "big data" presented in the report is that although college remains a valuable investment, it is also a significant financial risk.
Every student should work hard reduce that risk by looking at the net price of colleges, considering starting at a community college, filling out the Free Application for Federal Student Aid to ensure their eligibility for federal aid, including grants and less risky federal loans, and utilizing websites like Fastweb.com to look for scholarships.
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.