LANSING, Mich. (Matthew Miller, Lansing State Journal) - Lauren Fifarek's parents and her grandfather paid the tuition for her four years at Michigan State University in 1988, the year she was born. They bought one of the first contracts from the state's prepaid tuition program, the Michigan Education Trust. It cost them $6,800.
When she got to campus, she found her own ways to skimp. Her parents had offered to pay for two years of room and board in MSU's dorms if she would pay most of her living expenses thereafter. She found a job at an East Lansing apartment complex that covered rent as part of the deal and moved off campus in her sophomore year.
When she graduated last spring, her student loan debt amounted to exactly zero.
"Since I didn't have any loans, it didn't add more pressure about getting a job," said Fifarek, who works as a public affairs coordinator for the Michigan Health & Hospital Association. "There's already so much pressure on students to succeed, to show that spending four years meant something. The fact that I didn't have that extra pressure of needing to pay off debt, it was one less burden."
Her situation is less remarkable than it might seem. More than half of graduating MSU seniors don't owe a dime when they don their caps and gowns. Nationwide, the numbers are somewhat worse. According to a survey of 2008 graduates by the U.S. Department of Education, just a third of bachelor's degree recipients finished debt free.
There are reasons to be concerned about student loan debt. The combination of a faltering economy and rising college costs has driven student borrowing to unprecedented levels. Undergraduates who take on loans to pay for college borrow nearly twice as much in real dollar terms as their counterparts two decades ago. And, two decades ago, the majority of students didn't borrow.
A narrative of crisis has grown up around that upward trajectory, built around the stories of recent graduates struggling to pay back debts of $80,000, $100,000 or even more. Those stories are undoubtedly real. They are also rare, and they obscure an overall landscape that is both more complicated and less daunting.
'Not a national crisis'
Take, for instance, that just 0.3 percent of bachelor's degree recipients nationwide accumulate debt of more than $100,000. Just 10 percent have debt of $40,000 or more, and they are disproportionately students who attended for-profit schools and pricier private ones, those who take longer than four years to complete their degrees, independent students whose parents aren't contributing to their educational costs.
According to the Project on Student Debt, the average debt for 2010 graduates in Michigan - at least among the 60 percent that had debt - was $25,675, less than the average new car loan. At the current subsidized interest rate of 3.4 percent, that translates to $253 a month for 10 years.
That's not chump change, particularly for someone fresh out of college in an unwelcoming economy (though federal loans, at least, offer some flexibility on payments). But it's still a bargain compared to the average financial benefit of a college education.
Rising debt "may be an individual crisis," said Mark Kantrowitz, the publisher of Fastweb.com and FinAid.org, websites about planning and paying for college, "but it is not a national crisis."
"Someone who graduates from college with too much debt and can't afford to buy a house," he added, "the question is 'Would they have been able to buy a house if they hadn't gone to college?' "
Benefits of a degree
The financial benefits of a college education aren't spread equally among graduates or equally across the working lives of individuals. But, on average, they are substantial.
An analysis by the College Board published in 2010 found that full-time workers with bachelor's degrees earned, on average, $21,900 more a year in 2008 than those with just a high school diploma. College graduates were also much more likely to be working.
Even assuming that a student borrowed the full cost of tuition and fees and didn't work during college, the average four-year college graduate would surpass the average high school graduate in total lifetime earnings at age 32 and go on to earn $336,000 more over a 40-year working life, the report said, and that's after deducting the cost of loan payments.
Susan Dynarski, a professor at the Gerald R. Ford School of Public Policy and the School of Education at the University of Michigan, said she believes some of the questions about whether a college education is worth the price stem from the fact that college costs have risen steadily while median incomes for college graduates have been more or less flat for decades.
"The thing is, earnings for everyone else have been taking a dive," Dynarski said.
"One way to think about it is there's never been a worse time not to be a college graduate. We don't get to choose to be our fathers or our mothers. We can choose whether to get a college degree today or not, and, if you don't get one, you can fall pretty far."
College costs soar
The rise in college costs over the past decade has been dramatic. At Michigan's 15 public universities, average in-state tuition increased by two-thirds after adjusting for inflation.
The biggest driver of that for public universities here has been disinvestment by the state, a massive shift of college costs from the taxpayers to students and their families. When adjusted for inflation, declines in per-student state funding exceed tuition increases by a few hundred dollars.
But the increase in the sticker price of college disguises a more complicated trend, an increase in the range of prices students pay but not in the cost for all students.
According to the College Board, the net cost of college at a public university actually declined for students in the lower half of the income distribution from 2003 to 2008 due to increases in grant aid.
Among MSU's many institutional aid programs, for instance, is one called Spartan Advantage designed to eliminate loans for in-state students whose families fall at or below the poverty line. After those students receive work-study funds, MSU covers the rest of the cost for tuition, fees, books and room and board.
In 2006, its first year, 710 students took part, receiving a total of $2.4 million. Last year, 1,813 students got a total of $11.5 million. Between the 2009 and 2010 academic year, the net cost of attendance for in-state students whose families make $30,000 a year or less actually declined by more than $200.
But prices for those whose families are on the other end of the income scale are rising quickly, and it shows. Just 6 percent of MSU seniors had $30,000 or more in debt in 2008. Last year, it was 16 percent.
Typically, those high borrowers have been independent students, those who aren't poor enough to qualify for gift aid, but not wealthy enough to pay much out-of-pocket and, in some instances, students majoring in fields that promise a solid enough financial return to make borrowing a better bet, said Rick Shipman, MSU's director of financial aid.
"What's changed is, as the economy has shifted and costs have gone up ... it ends up being more regular students who are borrowing these larger amounts," he said, "and they're doing it simply because they don't have another place to turn for the money that they need."
Aid 'shopping sheet'
Last fall, the U.S. Consumer Financial Protection Bureau put out a draft of a financial aid "shopping sheet," designed to give students a clear accounting of the costs of attending a given school, the aid that's available to them (with clear distinctions between loans and grants), the school's graduation and retention rates, and the likely cost of loan repayments.
It's a response to a long-standing complaint from consumer advocates and students themselves: that the information colleges provide is too often confusing, that there is no simple way to compare costs between one school and another.
"I've had families come to me thinking they had a free ride from a college only to discover, when I look at the award letter, that there's a $20,000 Parent Plus loan on top of $5,000 of student loans," Kantrowitz said. "That's how you get to six-figure debt."
The horror stories of student debt seem to come all-too-frequently from students who have made questionable financial choices: picking an expensive private school over a cheaper public one or borrowing heavily for a major that doesn't promise particularly good job prospects or quick earning potential.
"You've got to treat this as you treat any consumer decision and, in this case, a very large consumer decision," said Don Heller, the dean of MSU's College of Education.
Not all loans equal
And they should know that not all loans are created equal, said Lauren Asher, president of the Institute for College Access & Success and co-founder of its Project on Student Debt.
Federal loans come with guarantees of accommodation for financial hardship and flexible repayment options. Private loans "are a lot more like credit cards," she said, except that, like federal loans, they aren't dischargeable through bankruptcy except in rare cases.
In some instances, private loans aren't even dischargeable through death. Asher said students should make them "a loan of last resort."
Asher's organization has spent years calling attention to the problem of rising student debt. Still, she said, sometimes borrowing modestly can be better than not borrowing at all.
"Some people make the decisions to avoid or limit debt that can actually undermine their success," she said.
"If a modest federal student loan can help you finish in four years rather than five, go full time rather than part time, limit your work hours so you can study and pass your classes, they're worth considering."