In examining affordability, amount of graduation debt varies by college

Alexa Ura

With college affordability becoming a more pressing concern among state and higher education leaders, almost a third of UT undergraduates left the 40 Acres with more than $24,000 in debt during the last four years, according to figures obtained from the Office of Financial Services.

While the average graduating debt has dropped for UT students in the last few years, it reached an all-time high of $26,108 among students who borrowed money for college in the class of 2010. The average graduating debt was $25,191 for the class of 2012.

A variety of funding sources, including the availability of federal and state grants and college-specific scholarships, influence students from different financial backgrounds to borrow in varying degrees.

Thomas Melecki, director of the Office for Financial Services, said the majority of loan dollars borrowed by UT students are from federal loan programs that offer a variety of options to repay, defer or have a loan forgiven.

Last year, funding for federal direct subsidized and unsubsidized loans totaled $112.2 million for UT students.

“Don’t get me wrong, I’m a firm believer that students should borrow as little as possible,” Melecki said. “But I also believe they should not be afraid of borrowing what they need to get their degrees because, as the federal Bureau of Labor Statistics data show, the more education they have the more likely they are to earn more and the less likely they are to be unemployed.”

Students should think of taking out debt as if they were investing in themselves despite the negativity that surrounds student debt, Melecki said.

“I used to work in the loan business, and I will say the student body here is a good investment,” Melecki said. “But like any investment, you want to pay as little as possible.”

In most cases, the average debt borrowed by students is less for students from colleges who come from households with a high average household income, but colleges with students who on average come from lower-income households borrowed less than those with students from households with incomes that fall in the middle of the spectrum for May 2012 graduates.

For example, McCombs graduates came from families that had an average household income of $82,432 while social work graduates came from families with an average household income of $48,937.

Only 19 percent of 2012 McCombs graduates took out debt — the smallest percentage of borrowers among graduates from all colleges — while 40 percent of 2012 social work graduates borrowed. At the same time, McCombs graduates came from families with the highest average income household among other colleges and social work graduates came from families with the lowest average household income.

The number of social work students borrowing has increased steadily over the last four years with borrowers making up an average of 32 percent of every graduating class.

Social work senior Gwendolyn Cubit said she transferred to UT from Austin Community College in 2011 and has accrued more than $15,000 debt in less than two years while receiving $5,000 in scholarship funding every semester and even paying off some loans while still in school.

“I didn’t imagine taking out so much in loans when I started my undergrad, but I came from ACC where tuition may cost $800 a semester to UT where tuition is almost $5,000 a semester,” Cubit said.

Cubit said she is still worried about finding a decent job and paying back her loans despite obtaining a degree from UT.

“Attending and graduating from UT is viewed as prestigious so I do believe my degree was worth the debt, but then you leave with massive debt and can’t find a job in your profession,” she said. “Then you question if it was worth it. I think right now I do, but call me in a year and I’ll tell you then.”

The percentage of graduates who borrowed increased during the last four years for five colleges, including the School of Architecture and the School of Social Work while the percentage of graduates who borrowed decreased for six colleges, including the College of Liberal Arts, the McCombs School of Business and the College of Communication.

Another reason average debt varies across colleges may be the variation among college-specific scholarship programs that help students avoid debt. 

Last year, the College of Liberal Arts — the largest college on campus with almost 8,000 students — awarded $628,910 in scholarships. Meanwhile, the McCombs School of Business, with less than half of the population of liberal arts, awarded $1.1 million. Both totals do not include individual departmental scholarships.

The Jackson School of Geosciences graduating classes have the smallest percentage of borrowers with an average of 16 percent of borrowers over the last four years. Geosciences incentivizes its students to progress faster through its degree plan by automatically awarding merit-based scholarships that increase every year to students with qualifying grade point averages.

For example, a freshman with a 3.0 GPA receives $750 a semester while a freshman with a 4.0 GPA receives $3,000. A senior with a a 3.0 GPA receives $900 a semester while a senior with a 4.0 GPA receives $3,450.

Diana Orozco-Lapray, a doctoral student in the Human Development and Family Sciences Department, said she graduated from the College of Natural Sciences last year with almost $60,000 in student loans after five years as an undergraduate.

Orozco-Lapray said the debt she incurred was a good investment and is now pursuing her graduate degree at UT because of the funding offered by her department.

“I wouldn’t have forgone going to college just because of the loans,” Orozco-Lapray said. “Now that I don’t have to pay for graduate school, I feel a lot better though. The department funding I get now covers all my tuition expenses.”

Some students receive additional funding through scholarships that are not donated to a specific department and are awarded through the Office of Financial Services or through Texas Exes, the UT alumni organization, which gives out close to $1.9 million in scholarships annually. This year, the Texas Exes awarded 676 scholarships to students across the University.

Aside from college-specific scholarships, the Office of Financial Services includes loans as part of a student’s financial aid package when grants do not cover all of a student’s expenses. 

The Pell Grant is the University’s largest source of student grants. Last year, the University distributed $49.6 million in Pell Grants to 11,569 students.

TEXAS Grants, which provide half of the funding Pell Grants provide to students, were cut by 10 percent in the last legislative session and could face further reductions during the current legislative session. The Texas Higher Education Coordinating Board, which oversees financial aid programs for public institutions of higher education, recommended lowering the average amount students receive from $5,000 to $3,000.

Coordinating board spokesman Dominic Chavez said the board does not intend to make students take out more debt and hopes to avoid implementing its recommendation by pushing for more state funding for the program. 

UT is making its own efforts to incentivize graduating within four years by piloting several financial aid programs that intend to lower student debt as part of an initiative to increase four-year graduation rates to 70 percent by 2016.

Earlier this week, the University announced four new financial aid programs that will target students who are less likely to graduate on time by tying funding to timely degree completion. Funding for the programs totals $5 million and will be awarded to students starting next fall.

The Office of Financial Services will also implement a pilot program next year that will offer loan forgiveness for 200 incoming freshmen that have been awarded federal unsubsidized loans. The program will offer
students up to $2,000 in loan forgiveness if they meet course credit requirements that will put them on track to graduate in four years.

Chavez said he applauds the University’s early efforts to balance reducing debt and increasing graduation rates. He said student debt plays into a larger policy discussion to fundamentally bend the cost curve at the state and national level.

“We do recognize that we cannot continue to sustain this type of growth in tuition and fees without appropriate funding,” Chavez said. “We need to find a balance between sufficient investments from the state and student responsibility to graduate in a faster and more efficient manner. This is a shared responsibility model.”