Indiana Alumni Magazine: How Do Students Pay For Their Education?
By Mike Wright
Indiana Alumni Magazine
Some students work, some earn a free ride, some borrow money, and many use a combination of financial resources.
Brian Winterman [now a SLIS graduate student, see sidebar below] took student loans to cover the cost of his undergraduate education at IU Bloomington. He worked to pay his living expenses. At IUPUI Andron Stallion is working two jobs, living at home, and borrowing to finance his education.
Their stories are typical of college students today, who often must find more than one way to pay for higher education as they face significantly higher costs than their parents did a generation ago.
According to statistics from the Indiana Commission for Higher Education, the cost to attend IU doubles about every 10 years.
This academic year, IUB's office of student financial assistance estimates, it will cost an Indiana resident undergraduate $13,826 for tuition and fees, room and board, books and supplies, transportation, and miscellaneous expenses.
That's up from $10,568 in the 1995-96 academic year. With the state's dire financial condition and its cutbacks in education funding, costs may rise significantly again next year.
With those realities at hand, nearly half of IU's 96,000 students systemwide receive some type of financial aid. More than 37,000 get grants or scholarships, and 33,000-plus are borrowing money. But in terms of dollars, 63 percent of the financial aid money doled out through IU is in student loans. Only about a third of the financial aid comes in the form of grants and scholarships. And work income doesn't go as far as it used to.
"In the last five years, we've seen a shift away from a reliance on working to borrowing to pay for college," says Susan Reeder Pugh, BS'67, MAT'69, EdD'82, director of IUB's office of student financial assistance.
Besides rising costs, several other factors have pushed students toward loans, she says. Work income hasn't kept up with the costs. Also, fees are due over a short period of time, and students can't earn money fast enough to make the large payments.
"As a result, students who used to work for half and borrow half are now borrowing about 80 percent," Pugh says.
Family constraints also influence the trend toward borrowing. Single-parent families, extended families where a relative other than a parent raises a child or children, and families with stepchildren in one household and their own children in another tend to have less ready cash to pay for college.
"Financing demands are almost as varied as the nature of families," Pugh says. "That's the advantage of borrowing. It fits the criteria of more people."
Students say that college is worth the investment, whatever the method of enrollment numbers at IU bear that out. But the trend toward borrowing means more new graduates leave IU with a heavy load of debt.
Statistics from IUPUI show the amount of money borrowed by students has nearly tripled in the last 10 years, from $31.1 million in 1991-92 to $92.5 million in 2000-2001. Systemwide, IU students borrowed $242.2 million during the current academic year alone.
Although the debt load is rising for many students leaving college, Charles Carothers, director of financial aid at IU Northwest in Gary, says borrowing is an efficient way to finance an education.
"I've seen studies that try to measure the average lifetime earning power of a college graduate versus that of a high school graduate," he says. "It seems to range anywhere between $500,000 to $1 million more for a college graduate. If you have to borrow $20,000 and it pays you back at dollars, you'll never find a better loan."
The American Council on Education seems to go along with that assertion. The council chronicled the growth of student loans in the 1990s, attributing the trend to congressional changes in federal loan programs that made more money available to more students. Nationwide, the number of student loans doubled during the decade.
The report says the median level of loan debt for students graduating from public universities, $15,375, is manageable, with payments less than $200 a month. And many students who borrow say they couldn't get through college otherwise.
Winterman, BA'98, estimates he still owes $11,000. He's already saving for the education of his daughters. "I've started two mutual funds so they'll have money to go to school," he says.
That approach is paying off for Sarah Lowe, an IUB sophomore from Greencastle, Ind., whose parents started a college fund when she was born.
"It will cost about what we figured," Lowe says, "but I may have to take a student loan at the end."
Stephanie Benjamin, a first-year student from Bloomington, hopes to get by without loans. Her parents also set up a college fund when she was born. Her mother works at IUB, so Stephanie pays half-tuition. She also has a scholarship, and sophomore standing will mean she can graduate in three years.
Others aren't in as good a position to pay for school, especially at IU's urban commuter campus in Indianapolis and at its regional campuses around the state. Carothers says many regional-campus students attend school part time and work full time.
And because the vast majority don't live on campus, living expenses and transportation costs are higher than those for students at IUB. Barbara Thompson, director of student financial aid services at IUPUI, says the estimated cost to attend this year is $16,995 -- more than $3,000 higher than in-state undergraduates at IUB.
Karen Ricketts, of Indianapolis, is a part-time student, full-time employee. In her fourth year at IUPUI, she has sophomore standing. She lives on her own while pursuing a nursing degree. Ricketts sees herself accumulating a lot of debt.
"My mom worked here so we got 50 percent off and paid out-of-pocket the first year or two," she says. "But now it's just student loans."
She believes, however, that the expense and effort will be worth it in the long run.
"There's a nursing shortage right now so it pays pretty well," she says. "I don't think I'll have any trouble, but it may take awhile to pay it off."
Stallion, a freshman in electrical engineering technology at IUPUI, says he is simply doing what he has to do -- living at home, working two jobs, and taking loans -- in order to earn a college degree.
"I knew it would have to be like that," he says. "It will pay off in the long run, so I'm doing it now."
Being able to spread out the cost of college is one advantage of student loans, Pugh points out.
"College costs are not like a mortgage, where you pay over 20 or 30 years," she says. "The phenomenon of college is that you pay in four years. Many don't have the cash to do that, so they borrow money and pay it off over 10 or 15 years."
IU's participation in student loan programs has utilized two systems since 1994. IUB and IU South Bend used the direct lending program, giving students direct access to loans from the federal government. Other campuses remained on the traditional loan system, called the Family Federal Education Loan Program, which goes through lending institutions.
A recent action by IU's trustees will eliminate the direct lending program when the university implements its new PeopleSoft financial aid software, scheduled for no earlier than 2004. The guaranteed loan money available to students won't change, only the immediate source of funding.
Winterman agrees with Carothers that borrowing for college is an excellent investment. He will encourage his daughters to take advantage of loans even if his mutual funds prove to be enough to finance their education.
"It's the best loan in the world," he says.
BRIAN WINTERMAN, 27
Major: Bachelor's in anthropology/classical studies at IU Bloomington in 1998; pursuing an MLS degree in School of Library and Information Science.
Current job/career aspiration: Branch library coordinator at Life Sciences Library/academic librarian.
Family: "At one point during my undergraduate years, I was one of three in my family in school. I have an older brother who graduated from college the year before I started. My sister, stepmother, and I all went to college at around the same time. After I graduated, my father went back to school to finish his degree. I was single when I started college but am now married. My wife, Una (Thacker), earned a bachelor's in journalism at IUB in 1997. We have two daughters, Stella, 4, and Ester, 1."
Work load: Currently taking six hours of coursework; works full time for the university. As an undergraduate, always had at least one part-time job during school. For two years worked on campus through work-study; worked in local restaurants at night and on weekends. Often worked full time during summers. Lived in dorm two years, then in rentals. Now rents a house on East 15th Street in Bloomington.
College funding: Undergraduate education was about 50 percent government loans (Stafford, subsidized); 20 percent from work, including work-study; 30 percent family contribution. "As an IU employee, I receive a tuition waiver. I get three credit hours per semester free and three credit hours at half price. Because I take six hours each semester, I pay about $400 out of my pocket for tuition."
Approximate indebtedness: Started with debt of about $12,500; now owes about $11,000.
[SLIS NOTE: The MLS, Master of Library Science degree program at the School of Library and Information Science at Indiana University, requires 32 semester units. The MIS, Master of Information Science degree program requires 42 semester hours. Tuition credit hours fees for the academic year 2001/2002 are as follows for SLIS Graduate Students: Indiana Resident = $190.85/credit hour; Nonresident = $555.90/credit hour.]
Mike Wright, BA'78, is managing editor of the Indiana Alumni Magazine. He and his wife, Karen, are repaying loans that enabled their daughter, Richelle Wright Brown, BS'99, to attend IUB.
Try these online resources to help you prepare for college payments:
o FinAid Calculators -- "FinAid's custom calculators can help you figure out how much school will cost, how much you need to save, and how much aid you'll need." Includes a College Cost Projector, Savings Plan Designer, Financial Aid Estimation Calculator, and Loan Payment Calculator.
o The All-Purpose Goal Planner -- Figure out how much you need to save each month to pay for your children's college education and other goals.
o FastWeb Cost Calculators -- A total college cost calculator, student loan payment predictor and loan analyzer.
o Calculate Estimated Costs of Borrowing -- A number of student loan repayment calculators, including level repayments, graduated repayments, income-sensitive repayments, federal consolidation loan repayments, Perkins loan repayments, interest capitalization, student loan prepayment, and the Choices borrower benefits calculator.
Posted March 05, 2002