By RYAN J. FOLEY, Associated Press
IOWA CITY, Iowa (AP) — President Barack Obama's visit to Iowa to talk about college costs is drawing attention to a surprising fact about a state known for education and frugality: its college students graduate with some of the highest debt in the nation.
Nearly three-fourths of graduates of Iowa's four-year public and private, non-profit universities left school with debt in 2010. They owed nearly $30,000 on average, the third highest debt load in the nation, according to the Project on Student Debt, a national group.
The massive amount of student borrowing flies in the face of the state's thrifty culture. State and local governments in Iowa, for instance, carry some of the smallest debts in the nation, and the cost of living in the Hawkeye state is relatively cheap. Tuition rates have spiked in the past 15 years as state funding for public universities shrank, but they remain below the national average.
Policymakers point to a variety of reasons for the problem, including a shortage of state grants and scholarships, household income that is below the national average and has not kept up with tuition increases, more students attending costlier private schools, and policies that have encouraged borrowing from private lenders.
"We talk to students daily who have gotten in over their heads," said Heather Doe, a spokeswoman for the Iowa College Student Aid Commission, which oversees the state financial aid programs that do exist.
Morgan Scherpelz, a 20-year-old University of Iowa sophomore from Fox River Grove, Ill., says she is better off than some students after earning merit scholarships that offset part of her out-of-state tuition. But she still expects to graduate with $30,000 in loans and then she'll borrow more for a graduate degree in speech pathology.
"I'm just going to be digging myself out of this gigantic money pit, while figuring out how to pay for my kids' education," Scherpelz said. "I'll be starting a life while trying to pay off a debt that I feel should have been gone long ago."
When Obama appears at the University of Iowa Field House on Wednesday afternoon, he's expected to call on Congress to prevent the interest rate on a popular federal loan program from doubling. His message is sure to resonate with young voters as he seeks re-election. Supporters lined up Monday morning hours before the university started giving away tickets to the event, which is expected to draw thousands.
Senior Brian Kroeger, 21, is among those hoping Congress will act. The history major from Illinois said he anticipates graduating this summer with about $60,000 in debt even though he's worked through college and earned Iowa residency to get a lower tuition rate. The debt is weighing on him as he plans his wedding, and he wonders whether he should have gone to community college his first two years to save money. Still, he's trying to stay positive as he looks for a job.
"It'll be just like any other debt: manage your priorities, pay it off month after month and hope that you don't default," he said, with a laugh.
Federal officials say allowing the rate of Stafford loans to double to 6.8 percent in July would cost most students about $1,000 more during the life of their loans, while keeping them low for another year would cost taxpayers $6 billion.
Iowa Sen. Tom Harkin, a Democrat, called the rate increase "devastating" and said he planned to introduce legislation this week to prevent it.
"This is a problem that affects my fellow Iowans profoundly," said Harkin, who chairs the Senate's education committee.
Yet experts say action by state lawmakers and university leaders is much more likely to affect the state's student debt — for better or worse — than the rate increase. Iowa State University's new president, Steven Leath, said earlier this week he would soon launch a major fundraising campaign to enable the school to provide more financial aid.
Doe, the aid commission spokeswoman, said the agency didn't expect more money from the state when lawmakers and Republican Gov. Terry Branstad reach a budget deal in coming days. Iowa spent about $245 per undergraduate on student grants in 2009-2010, far less than the national average of $627, according to the National Association of State Student Grant and Aid Programs. And unlike in many states, most of the grant money goes to students at private colleges.