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Communications Update
2015 Highlights
Aaron Wyatt & Emily Persky| Council Meeting| August 2015
Understanding Borrowing
in Washington
Rachelle Sharpe, PhD
Acting Executive Director
Becky Thompson
Director of Student Financial Assistance
Senate Higher Education
February 2, 2017
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Agenda
Educational Loans Overview
Affordability Framework
Student Debt In Washington
Policy Implications
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Educational Loans Overview
Loan Types
Loan Limits
Federal Loan Benefits
Federal Repayment Plans
Private Education Loans
Consumer Information
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Federal
Part of
financial aid offer
Federal
Direct
U.S. Dept. of Ed.
Unsubsidized
Do not have to
demonstrate need
Subsidized
Undergraduate
students with need
Perkins
School as lender
PLUS
Parents of
undergraduate
Grad PLUS
Graduate students
Private
Private lenders
Washington
Target workforce
shortage areas
Primary Types of Educational Loans
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Federal Student Loans for Undergraduates
Federal Direct Loan Program
Subsidized loans for students with financial need
• No interest while in school at least half-time and during grace and deferment periods
• Current interest rate is 3.76%
Unsubsidized loans for students
• Interest accrues from first loan disbursement
• Current interest rate is 3.76% (5.31% for graduate students)
Perkins Loan
• Subsidized loans for students with financial need
• Current interest rate is 5%
PLUS
• Graduate students or parents of dependent undergraduate
• Current interest rate is 6.31%
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STAFFORD DIRECT LOANS
Year
in School Dependent Independent
Subsidized Cap
First Year
$5,500 $9,500 $3,500
Second Year
$6,500 $10,500 $4,500
Third and Beyond
(each year)
$7,500 $12,500 $5,500
Aggregate Limits
$31,000 $57,500 $23,000
PERKINS LOANS
Annual Aggregate
Undergraduate
$5,500 $27,500
Graduate
Student $8,000 $60,000
• Dependent students
must report their
parents’ income and
assets on the FAFSA.
• Dependent students
may borrow
additional amounts if
parents were denied
parent PLUS loan.
• PLUS loan limit is cost
of attendance and
requires credit check.
Federal Student Loan Limits
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Repayment Options & Consequences
Deferments or Forbearance – delay of repayment
• In school half-time
• Active military service
• Economic hardship
• Illness
Forgiveness – teacher or public service
• Low-income school for five years (teacher)
• Certain positions and 120 payments (public service)
Cancellation or Discharge options
• Total and permanent disability
• Death
• Bankruptcy (only in rare cases)
• Closed school
• Unauthorized payment/false certification
Default
Failure to repay the
loan according to
the promissory note
terms results in a
default. For most
federal loans,
default occurs if no
payment for more
than 270 days.
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Standard
• Fixed amount paid up to 10 years and less interest paid overall.
Graduated
• Lower at first, then increase every two years; pay more interest over time.
Extended
• Payments fixed or graduated but lower; students must have more than
$30,000 in outstanding loans.
Income-Based/Pay as You Earn
• Considers total loan debt, income, household size.
• Show high debt to income hardship.
Primary Federal Student Loan Repayment Plans
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• Provide supplemental funding to cover unmet student need.
• Do not have caps. Students may borrow amounts up to school certified
cost of attendance.
• Essentially not regulated by the government.
• Loans issued by banks or credit unions.
• Approvals depend on credit worthiness of the borrower/co-signer.
• Often have variable interest rates.
• Higher interest rates than with federal loans.
• Repayment terms are often less flexible with private loans:
Typically no income-based repayment plans.
Typically no loan forgiveness or deferment options.
Private Loans
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Consumer Information
Federal
• Entrance
counseling
• Financial
awareness
counseling
• Repayment
calculators
Campus
• Financial aid
orientations
• Information –
award letters,
portal, website
State
• readysetgrad.org
• Financial literacy
– Dept. of
Financial
Institutions
Private
• Online resources
• Nonprofit
assistance
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Affordability Framework
Principles
Partners
Measuring affordability
Packaging
Aid by income
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Paying for College is a Shared Investment
Students &
Families
Federal & State
Governments
Institutions
Business &
Philanthropy
Every Washington resident who desires and is able to attend
postsecondary education should be able to cover educational costs.
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• All students and their families are
responsible for sharing in the cost
of their education.
• Families should receive early,
high-quality information about
financing options.
• A reasonable amount of work
supports student success.
Affordability is
viewed from the
perspective of
students and
families.
Students and Families
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• Set stable and predictable tuition
and financial aid policies.
• Provide a variety of affordable
educational pathways for students.
• Consider the full cost of
attendance for each sector
when addressing affordability.
Ensure affordable
access to
high-quality
instruction through
coordinated
funding to public
institutions.
State Policymakers
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• Provide services that support
student success.
• Commit to serving a diverse
student body, including low-income
and first-generation students.
Play a critical role
in addressing
affordability,
including through
institutional aid and
financial aid
policies.
Institutions
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• Employer training programs.
• Employer tuition assistance.
• Funding for scholarship support.
• Internships and mentoring programs.
Businesses and
private donors play
an important role in
addressing
affordability through
tuition and
scholarship support
and mentorship.
Business and Philanthropy
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Measuring affordability
College affordability has three major financial components:
Costs
Include tuition and fees,
books, room and board, etc.
Financial Aid
The system by which
some costs are reduced
or waived, lowering
total cost for recipients.
Student Options
Students have to decide how
to pay for their net costs –
the cost remaining
after any aid is applied.
They can work, borrow,
attend part-time, choose
different institutions, etc.
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64%
34%
2%
2015-16 Total Aid by Type
Grants/Scholarship Loans Work
55%
21%
19%
5%
2015-16 Total Aid by Source
Federal State Institutional Private
Source: Washington Student Achievement Council. Unit Record Report, 2015-16. [WA resident undergraduate need-based recipients].
Nearly $1.8 Billion in aid Provided to Students
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Financial Aid Type by Income
Source: Washington Student Achievement Council. Unit Record Report, 2015-16 (CB12121 1/13/2017).
[WA resident undergraduate need-based recipients by Median Family Income (MFI).
11%
28%
1%
12%
31%
39%
40%
15%
36%
29%
23%
23%
7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
MFI > 90
MFI 51-90
MFI 0-50
Federal Grants State Grants Institutional/Other Grants
Student Loans Parent PLUS Loans Work Study
• Low-income
students have
financial gaps.
• Institutional aid
supports middle
income.
• Students are
borrowing at all
income levels.
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grants
$1.1 billion in total grant funding
$379 million in Pell Grant to 102,300 students
$370 million in state grants to 82,900 students
Source: Unit Record Report, 2015-16: Financial aid dataset submitted by 67 institutions. Narrowed to undergraduate, resident, need-based recipients.
Sample Budget
$21,800
Tuition
$10,000
Books
$800
Room/Board
$7,600
Transportation
$1,500
Personal
$1,900
Various Types of Aid Help Students Meet Costs
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grants
campus aid
scholarships
Campus aid includes tuition waivers, grants,
and scholarships – need-based or merit.
$334 million in institutional aid provided to 61,800 students
$55 million in private scholarships (theWashboard.org)
Source: Unit Record Report, 2015-16: Financial aid dataset submitted by 67 institutions. Narrowed to undergraduate, resident, need-based recipients.
Various Types of Aid Help Students Meet Costs
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grants
campus aid
scholarships
work study
$25 million in work study funding
earned by 9,500 students
Source: Unit Record Report, 2015-16: Financial aid dataset submitted by 67 institutions. Narrowed to undergraduate, resident, need-based recipients.
Various Types of Aid Help Students Meet Costs
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grants
campus aid
scholarships
work study
loans
$551 million in student loans to 86,400
undergraduate resident students last year
Source: Unit Record Report, 2015-16: Financial aid dataset submitted by 67 institutions. Narrowed to undergraduate, residents. (CB17618 2/1/2017)
Various Types of Aid Help Students Meet Costs
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Debt in Washington
Borrowing over time
Differences by dependency status
Loan volume by type
Total debt upon graduation
Default
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Annual Student Borrowing by Sector Over Time
Source: Unit Record Report, Financial aid dataset submitted by 67 institutions. 2008-09 to 2015-16. Undergraduate, residents. All loans except PLUS. (CB17614 2/1/2017)
Annual borrowing
increased somewhat
at public institutions
during the recession.
Private averages
decreased due to a
change in
participating
institutions.
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
Research
$6,800 $6,900 $7,100 $7,200 $7,200 $7,300 $7,200 $7,100
Comprehensive
$6,600 $6,700 $6,800 $7,100 $7,000 $7,000 $7,000 $6,900
Private 4-Year
$9,200 $9,100 $9,000 $9,200 $9,200 $8,100 $7,600 $7,600
CTC
$4,800 $5,300 $5,500 $5,600 $5,500 $5,600 $5,600 $5,600
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
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$6,400
$6,200
$8,000
$4,000
$6,400
0
5,000
10,000
15,000
20,000
25,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
Research Comprehensive Private 4-Year CTC Private Career
Average Loan Amount Headcount
Annual Student Loans: Dependent Students 2015-16
Source: Unit Record Report, Financial aid dataset submitted by 67 institutions. 2015-16. Undergraduate, residents. All loans except PLUS. (CB17612 1/31/2017)
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$8,700
$8,400
$7,100
$6,100
$7,900
0
5,000
10,000
15,000
20,000
25,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
Research Comprehensive Private 4-Year CTC Private Career
Average Loan Amount Headcount
Annual Student Loans: Independent Students 2015-16
Source: Unit Record Report, Financial aid dataset submitted by 67 institutions. 2015-16. Undergraduate, residents. All loans except PLUS. (CB17612 1/31/2017)
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Educational Loans
• $450 million to
17,600 graduate
students
• Average annual
loan $25,600 for
graduate
students
Source: Unit Record Report, Financial aid dataset submitted by 67 institutions. 2015-16. Loans by type to resident undergraduates. (CB17618 2/1/2017)
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Source: Unit Record Report, Financial aid dataset submitted by 67 institutions. 2015-16. Undergraduate, residents by MFI. All loans except PLUS. (CB17622 2/1/2017)
Student Debt by Income and Sector 2015-16
$7,100
$7,100
$7,700
$5,700
$7,300
$7,100
$6,600
$7,300
$5,300
$7,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Research Comprehensive Private 4-Year CTC Private Career
Average Loan Amount (excluding PLUS) by Median Family Income (MFI) and Sector
MFI 0-90% Average Loan Amount MFI >90% Average Loan Amount
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Student Debt by Sector (2015 Graduates)
Institution Type
Average Debt
(2015 graduates)
Proportion of
Graduates with Debt
(2015 graduates)
Research
$22,715 50%
Comprehensive
$23,569 60%
Private 4-year
$29,213 68%
State Average
Public + Private
$24,600 57%
Source: Project on Student Debt – Sector averages computed by WSAC for state aid participating institutions
Total Student Debt by Sector
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Cohort Default Rates in Washington
Source: U.S. Department of Education, Financial Aid “Official Cohort Default Rates,” 2009-2013 available at:
http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html. *US Total includes International institutions approved for federal lending
• Default rates
have come down
and are below
the national
average.
• Rates vary by
sector.
• Students with
lower balances
have higher
defaults.
Private Career (for- and
nonprofit), 26.1%
16.4%
For-Profit, Four-year,
21.1%
13.7%
Nonprofit, Four-year, 4.0%
2.9%
CTC, 17.1%
17.5%
Public, Four-year, 4.8%
3.7%
Washington Total, 11.3%
10.1%
US* Total, 13.2%
11.2%
2009 Cohort 2010 Cohort 2011 Cohort 2012 Cohort 2013 Cohort
Three-Year Cohort Default Rates in Washington
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FP 2: 63.7% borrowing,
17.0% defaulted
FP 4: 69.4% borrowing,
13.7% defaulted
NP 2: 79.2% borrowing,
9.9% defaulted
NP 4: 60.2%…
CTC: 15.5% borrowing,
17.5% defaulted
PBI…
Washington Total
31.0% borrowing,
10.1% defaulted
0%
5%
10%
15%
20%
25%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
For-Profit, 2 and lower For-Profit, 4 and higher Nonprofit, 2 and lower Nonprofit, 4 and higher
Public, 2 and lower Public, 4 and higher Washington Total
Three-Year
Cohort
Default Rate
Fewer borrowers,
More borrowers,
higher default rate
More borrowers,
lower default rate
Undergraduate Borrowers
Borrowing and Default Rates Vary by Sector
Sources: U.S. Department of Education, Financial Aid “Official Cohort Default Rates” and IPEDS SFA Survey. Retrieved January 2017. Percent undergraduates accepting federal loans, 2012-14
average.
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Policy Implications
Affordable debt
Role of savings
Middle income gaps
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• Federal loans are broadly accessible and available at virtually every
Title IV participating campus (the Seattle CC District and Centralia do
not participate in Stafford loans).
• Federal loans require entrance and exit counseling to provide information
regarding repayment obligation, benefits and consequences of
delinquency.
• Any student can borrow through the Stafford loan program if they submit
a valid FAFSA, regardless of income.
• Student loans appear to combine with other aid, or in isolation, help
students confront rising costs.
Student Loans: Opportunity vs. Burden
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• Student borrowing increased during the recession but has
flattened.
Annual borrowing increased at a faster rate in the community colleges.
• The volume of student loans and number of borrowers has
increased over time.
However, private loan borrowing has decreased significantly due to
changes in the credit market.
• Washington is considered a “low debt” state for cumulative debt
upon graduation.
• Washington default rates are below the national average.
Summary of borrowing trends in Washington
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• How should the role of savings be considered?
• How much work should be considered reasonable for students?
• Can accelerated degree options offset student debt?
• What are affordability gaps for middle-income students?
• What is a reasonable amount of student debt by income level
and sector?
State Policy Considerations Related to Student Debt
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Affordable Debt Concept
“Affordable debt” assumptions
• No more than 10% of future annual earnings will repay the loan*
• Ten years of repayment at 5% interest
*For earnings at the 20th percentile of those with bachelor’s degrees in Washington.
Source: Fridley JL, Kumar G, Sung K and Sharpe R. Washington Interactive Affordability Model. 2017. https://affordability-model.css.uwb.edu/proto2/Washington.
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Continue the Conversation
Rachelle Sharpe rachelles@wsac.wa.gov
Becky Thompson beckyt@wsac.wa.gov