State Testimony on Student Loans and Debt

Remarks Submitted to the Joint Committee on Higher Education’s Subcommittee on Student Loans and Debt for Its Hearing of November 18, 2013

Thank you, Senator Donoghue, Representative Paul, and the members of the subcommittee, for this opportunity to share data and perspectives on the issues that are before you.

They are important ones. Access to higher education has never been more critical for students or for the social and economic health of the commonwealth and of the nation. It is vital that as a society we prepare students for college and make a college education accessible to them.

Debt is one of the tools that can help build accessibility for some students, if they borrow reasonable amounts and understand the long-term cost.

When contemplating public policy, as you are, it is important first to clarify the widespread misperceptions that the public has about the extent and depth of indebtedness among current students.

Let me paint for you the picture here at Williams College, the second oldest institution of higher learning in Massachusetts.

The public believes that almost all students, upon receiving their bachelor’s degrees, have incurred more than $20,000 of debt. But when the Williams Class of 2013 walked across the commencement stage, only 31% of them had borrowed at all. And of those who had, their average indebtedness, cumulative over four years, was $12,750.

Williams is fortunate to be able to admit students without regard to their ability to pay and to promise to meet 100 percent of the demonstrated financial need of all admitted students for four years.

All of our financial aid is need-based and more than half of our students qualify. The vast majority of that aid is in the form of grants and almost all of that grant support comes from Williams. In the current first-year class, the average grant is $41,800.

Some 95 percent of U.S. families qualify for financial aid at Williams. This group pays in tuition and fees each year an average of $15,000—a figure that has gone down over the last decade. The average for all students is $34,000.

When it comes to loans, Williams does not ask any students with family incomes up to $75,000 (and typical assets) to borrow at all. Their financial aid comes in the form of grant, plus a small term-time job.

Above the $75,000 level, we ask students to borrow between $1,000 and $4,000 per year depending on family income. The most debt that Williams asks a student to graduate with then is typically $16,000—a reasonable amount given their families’ incomes and their own future earning power. And remember: almost 70% graduate with no debt at all.

These figures result from decisions the college has made regarding the allocation of resources, such that our financial aid commitment is now around $50 million per year—three times what it was a decade ago.

I am aware that not all colleges possess the financial resources that Williams is fortunate to have, but I also know that our sister institutions across the commonwealth work equally hard to make themselves accessible and that their loan levels, by in large, are also much lower than the public believes them to be.

It is well established that public perception of student debt is skewed by the situation that prevails among for-profits.

Data published by the U.S. Senate Committee on Health, Education, Labor, & Pensions is revealing. At the for-profit schools that the committee reviewed fewer than half graduated. Some 96 percent of them incurred federal debt, whether they graduated or not. The schools charged students more than did comparable nonprofits, yet 86 percent of their revenue came from the federal government, and those funds were used primarily for non-educational purposes such as marketing. While they enrolled just over 10 percent of all students, they accounted for more than 50 percent of student defaults.

It is easy therefore to conclude where corrections to the student loan system should begin.

Thank you again for your deliberations on these important matters, to which I hope these brief remarks may make some small contribution.

Adam F. Falk
Williams College