Forty-two percent of college graduates in New York State carry some amount of student debt, with an average debt load of about $30,000. We sit down with Rockefeller Institute Director of Education Policy Studies Brian Backstrom to break down those numbers and learn what states are doing—and can do—to ease the burden of student debt.
Guest:
Brian Backstrom, Director of Education Policy Studies, Rockefeller Institute of Government
Learn More:
A Deeper Look at Student Loan Debt in New York State
Transcript was generated using AI software and may contain errors.
Anna Agnes 00:00
Hi, my name is Anna Agnes and I’m a student at the University of Albany. As a New York State resident, I chose to go to a SUNY school over a private school to hopefully help limit my student debt. It’s really impacting my decision on whether or not I’m going to go to law school. If I get in, and I actually would like to go, it’s really going to depend on how much scholarship money I can get.
Mary Thompson 00:18
Hi, I’m Mary Thompson. I went to SUNY New Paltz for three years for undergrad and now I am a grad student at UAlbany. I have approximately $20,000 in debt. My mom had to take out approximately $10,000 in order to cover one of my years because we didn’t get financial aid.
Alexandria 00:39
I’m Alexandria. I am also a grad student. I went to a private school for undergrad and I’m living off a debt, so it limits what I can do. Always making choices of how to spend. How much money to take out as appropriate.
Kyle Adams 01:12
Welcome to Policy Outsider from the Rockefeller Institute of Government, where we explore and explain how public policy shapes our everyday lives. I’m Kyle Adams, communications director at the Rockefeller Institute. Today, we’re talking about student debt, why it’s a growing problem, what it looks like here in New York, and what states are doing to solve it. But first, we’ve got some news. We’ve launched a brand new website for our Stories from Sullivan series, which you heard about here on Episode 3. If you haven’t already listened to that episode, I highly recommend it. This series presents our ongoing research into the opioid epidemic in Sullivan County. Our researchers have been there for more than a year now, conducting well over 100 interviews with the people on the frontlines of this crisis. The new site brings it to you in a beautiful modern presentation with photos and audio to really bring the problem to life. Check it out at rockinst.org/stories-from-sullivan. On a similar note, we recently hosted Stories from Suffolk, a forum with Suffolk County Executive Steve Bellone on Long Island. It was a great event with some really robust conversation of what can and should be done to help stem the tide of opioid abuse. You can watch a replay of the live stream at facebook.com/stevebellone. We’ll be bringing you more on that forum in an upcoming episode of this podcast. Now for today’s discussion about student debt, I’m joined by Brian Backstrom, director of education policy studies at the Rockefeller Institute. Brian, thanks for joining us.
Brian Backstrom 02:49
Happy to be here.
Kyle Adams 02:50
Let’s start with the basics. Why are we talking about student debt now? How did we get here? What are the stakes?
Brian Backstrom 02:56
More students than ever are borrowing to finance their education and more parents than ever are borrowing money to pay for their children’s college. Altogether, this means that outstanding student debt has reached record levels. There’s been a lot of public attention on this recently. I think it’s starting to have an effect on the choices kids are making about even going to college. For the first time, we’re seeing polling data that show more and more high school seniors are questioning whether going to college is financially worth the price. Clearly, the need to borrow money to pay for it factors into those decisions. But look, when people take out a mortgage because they want to buy a house, they have to make mortgage payments. When people go to the bank for a loan to buy a car, they need to make car payments. When people borrow money to pay for college, paying those loans back is part of the deal. But if society values getting more kids to college and through college, I think government can play a role in a few important ways. It can help families avoid student debt in the first place by making college more affordable. It can ensure that students and families who borrow fully understand their obligations and responsibilities as borrowers and protect them too against unfair and inappropriate lending practices. Government can help develop creative ways that students and families can save for and pay the cost of college. It can create options that keep the burden of repaying student loans manageable.
Kyle Adams 04:32
I want to return to the second part of the question, which is stakes. With all of this debt mounting nationally, the number keeps growing, what’s the risk? What could possibly come of that?
Brian Backstrom 04:43
One of the biggest factors that we see when students are incurring this amount of debt is it scares off those who come in their footsteps. I think that all of the hype that you’re hearing about how people are increasing in their default rates. How parents into their 60s are still making student loan payments on behalf of their children. You really are scaring people off of even the prospect of going to college. You have to do a deeper dive into the numbers to find out what the facts really are, what the options really are, and where the problems really lie. I think that’s where government plays its best role is figuring out exactly where the obstacles are and finding a way around them.
Kyle Adams 05:27
I’ve seen anecdotally, at least, that these student debt burdens can be keeping people from buying houses, making investments, getting married even. Moving on to these major life stages that they otherwise would be doing and that their parents or previous generations did more quickly. Does data back that up?
Brian Backstrom 05:44
Not really, there’s a commercial on TV now that talks about people not being able to buy houses or not even get married. A lot of that is being financed by people who want to refinance your student loans. So they’re creating this perception of a massive crisis that everybody who goes to college is suffering under student debt once they graduate and can’t function in life because of it. I think that’s when we start to get to some of the numbers and look at college affordability efforts that have been successful. Repayment strategies that work. Prepayment ideas that make it very affordable to go to college even without debt. The whole goal really is to come out of college with as little debt as possible. I think that’s the most advantageous thing that anyone can do starting out in the workforce. There are roles for everybody to play parents, students, and government alike.
Kyle Adams 06:37
In the first part of your new series on student loan debt in New York, you find that 42 percent of all New York college graduates have no debt and those with debt average about $30,000. How do those numbers stack up to other states and the national average?
Brian Backstrom 06:51
That’s a really important point, when you talk about average student loan debt burden, it’s really for only those students who have borrowed money for college. There’s a significant portion of people graduating from college without any debt at all. When you hear an average loan debt of $30,000, that’s only for the people who borrow and one of the things that we found when we looked at the numbers was, as you said, 42 percent of all undergraduate students who graduate, and this is from public colleges and private colleges, leave school with no debt at all. That puts New York State about in the middle of the road, we rank about 27th nationally. But if you look at that student loan debt amount, $30,000 on average, that puts us 15th nationally. We’re incurring more debt for college here in the East. I think that’s a reflection of the cost of college in New York and up and down the East Coast versus places like the Midwest and the South, where college is less expensive.
Kyle Adams 07:53
Looking at that 42 percent of graduates who have no student debt, what do we know about them demographically? Who are they?
Brian Backstrom 08:00
One of the problems that we’re facing is a lack of good data. We don’t know for sure the income profiles of the families where those students come from. We know that a lot of colleges, both public and private, make a significant investment in low-income students and students from middle-income families. It could be that a vast majority of that 42 percent are the people who should be graduating without debt. We just don’t know it in large part because there isn’t good enough data out there.
Kyle Adams 08:32
Looking at those numbers, 42 percent with no debt in New York, puts us middle of the road. $30,000 average debt puts us in the top third of states in terms of highest average student debt. Are there lessons to be learned there?
Brian Backstrom 08:46
Yes, I think New York has a modest stance on student debt, generally and relatively speaking, because it’s a national leader in keeping the overall cost of college low and in providing financial assistance to those who need it. SUNY’s base tuition is $1,000 less than the state systems of any neighboring state. It’s 20 percent lower than the national average. New York State is top in the nation for financial aid to students with need and it’s second in the nation in financial aid overall. We’re trying to make college more affordable. A few years ago, SUNY and CUNY adopted a rational tuition model that allows tuition to increase only $200 at most every year. That takes some of the bumps and surprises out of tuition increases that families aren’t necessarily planning for.
Kyle Adams 09:42
For those listening outside New York, SUNY is the State University of New York and CUNY is the City University of New York.
Brian Backstrom 09:49
Starting this year, the state’s Excelsior Scholarship Program will cover 100 percent of the cost of tuition at any of the state’s public universities for resident students from families making $125,000 or less. This is one of the most significant college affordability initiatives in the nation.
Kyle Adams 10:10
Looking at those numbers for New York again, do we see a difference in public versus private college or in different degree programs? What’s the breakdown?
Brian Backstrom 10:19
The public colleges and universities, the part of the state university system and city university system, are remarkably affordable here in New York. Almost half, about 47 percent, of graduates from SUNY’s four year schools graduate debt free. Those who do have debt, it’s much less than the national average and even the New York State average of public and private graduates combined. It’s about $26,600 for four year graduates and half that for community college graduates. CUNY posts remarkable numbers, about four out of five students who graduate there, 79 percent, graduate debt free, and the average CUNY loan is only about $11,700. It really is an affordable option for students to pursue and it starts them out in the workforce without tremendous level of student debt.
Kyle Adams 11:14
So you’re saying I should have gone to CUNY.
Brian Backstrom 11:17
I think that that’s a really good option.
Kyle Adams 11:21
In another installment of the education series, you’ve also looked at what other states are doing to protect student borrowers from predatory lending practices. For people who have already accrued this debt, there’s no going back. They can’t change it now. But they can be protected moving forward, so they can pay back more responsibly. What have you found there?
Brian Backstrom 11:39
Last year, Governor Cuomo proposed a package of protections for student borrowers and the Department of Financial Services here in New York has done a remarkable job of instituting some of those reforms already. They’ve developed and instituted a student protection unit dedicated solely to offering information and advice to student borrowers. There’s an ombudsman, an individual who is specifically tasked with handling complaints by students about student lending practices, and providing education and information about options that are out there. More can be done. There can be standardized codes of conduct for lenders, but I think that we’re paying attention to the issue. I think as public education grows in this realm, we’ll have standardized licensing, standardized practices, that’s going to help eradicate some of the bad practices that are happening out there.
Kyle Adams 12:38
What are some of those predatory practices if you can give us an idea?
Brian Backstrom 12:41
One of those practices is called forbearance. A private lender will call a student and say, if you’re having difficulty meeting your payments, why don’t we put it off for two years or three years? That’s okay by us. There’s been some instances where the lender doesn’t really talk with students about what that means. Interest happens to accrue during that entire period. When that three year temporary respite expires, students are faced with an even greater payment than they had before. This is a subject of a lawsuit actually against some of the largest student lenders. This is a type of practice that we think is deceitful and unfair, and simply adds to the burden of student debt rather than relieves it.
Kyle Adams 13:28
So you think that’s a ripe area for the state to step in with some regulation and structure?
Brian Backstrom 13:33
Yes, I think that’s a good role for the state to play as a protector of student borrowers.
Kyle Adams 13:39
In your most recent analysis, you reviewed prepaid tuition plans in 11 states. What are they? And how do they help?
Brian Backstrom 13:46
There’s a variety of models that are out there. But the basic principle is that parents can buy all or a portion of tuition at current prices. When it comes time for their child to go to college, what they bought at a discount rate counts just as much now towards the current tuition rate.
Kyle Adams 14:03
So they can start paying early basically. It seems to me that a program like that may favor families that are in an economic position to do so or even have the foresight to do that. Are there other plans or programs to balance that out?
Brian Backstrom 14:18
Yes, it’s not really just prepayment. It’s actually a way to save a significant amount of money. If tuition now is half as much as it will be when your child is ready to go to school, buying that tuition now will cost you half as much as it will be if you put it off for 10 years. There’s some great examples out there of how to go about doing this. Say a university charges $35,000 in tuition today and you have a 10 year old daughter, you can buy a 50 percent tuition coupon for $17,500. That 50 percent is what gets locked in, not the dollar value that you paid. Tuition say goes up 5 percent a year. That’s not unreasonable. It’s something that you see particularly in private colleges, but tuition goes up 5 percent a year for the next nine years. That means tuition is now $54,300 at just at the time your daughter is ready to go to college. She applies, she gets admitted. You take that 50 percent certificate you bought for $17,500 and that now covers 50 percent of the current tuition level or more than $27,000. You just saved yourself $10,000 and you avoided taking out a student loan of $10,000 right off the bat in year one.
Kyle Adams 15:40
What states are offering that kind of plan now and what states are still looking at it?
Brian Backstrom 15:44
There are 11 states that are offering some form of tuition prepayment, and it does vary over how it’s constructed. One of the good models I think, is in Florida, over a million families in Florida are participating in that state’s college prepayment program. It’s unique in that it offers a whole variety of combinations. You can prepay for community college or two year school. You can prepay for a four year university. You could prepay for a combination two years first at a community college and then two years at a four year university to complete your bachelor’s degree. They’ve even just started allowing parents to prepay room and board and locking that in so you can avoid literally a decade of annual increases by simply investing now in your child’s college. A lot of the states’ prepaid tuition plans build off of what’s called a 529 plan. Those are savings accounts and investment accounts that parents and students can use to grow money for their college tuition. It’s like an IRA except for college spending. What’s wonderful about 529 plans, all 50 states have them and you can invest in any state’s 529 plan, use it at any college or university for qualified expenses, which is tuition, room/board, even laptop computers. One of the things that makes it a remarkable savings program is that your investments, your deposits into the 529 plan, grow tax free. You’re also paying them tax free. You have no tax consequences from the growth of your savings and investments. Many parents and families are using these to pay their tuition in part or in full. In New York State, for example, about 800,000 families invest in 529 plans. There’s something along the lines of $23, $24 billion currently invested in those funds. This is for parents and students and families who are consciously setting aside money now and investing and letting that investment grow to give them greater purchasing potential at any college they want.
Kyle Adams 17:56
If you are saving for college right now and aren’t using a 529 plan, I would recommend going to check that out. You can learn more at nysaves.org. It’s a great program for anyone that’s saving for college. Taking a step back, I realized we dove right in on the assumption that college costs are going up and up and up. I want to take a second to look at that. Why? What’s driving college costs? Is it something that can be addressed at the root?
Brian Backstrom 18:25
One of the things that we did is looked at the increases in tuition and the increases in non-tuition costs—room and board and fees. There has been some chatter out in the community that in order to keep tuition increases low, colleges shift increases in room, board, and fees to larger levels. That’s simply not the case. We looked both at public and private colleges. There isn’t a shift of tuition increases over to non-tuition costs. The annual increases that consumers see, that students see, and their families is really the cost of operations occurring at campuses, whether that’s everything from staff salaries to the cost of doing business to the cost of food in the cafeteria, all of these things naturally lead to a steady increase in the cost of college education.
Kyle Adams 19:19
What are you looking at next in your series for the Rockefeller Institute?
Brian Backstrom 19:23
I think one of the most interesting and promising things being developed is tying the amount you’re required to repay to the amount of income you’re earning. Capping the burden that you’re going to face in paying back your student loans. There’s some proposals at the federal level saying no one should ever have to pay more than 10 percent of your monthly income as a repayment of student loan. That’s a really clever way to limit the burden that individuals face. Whether you come out of college earning $30,000 or $70,000, your student loan payment would be capped at 10 percent of that level, making the burden equal among all student repayment.
Kyle Adams 20:05
When it comes to solving the student debt problem, do you think it’s a matter of incremental fixes as we’ve been discussing? Or do we need some more drastic change, like free college education for everyone?
Brian Backstrom 20:17
Free isn’t free. College will never be free, somebody’s paying for it. That’s either through taxpayers, or higher taxes, or less public spending on something else. It isn’t like Colgate or Columbia or Hamilton or Hobart are going to all of a sudden start offering so-called free tuition. Some colleges do now, I think Harvard offers free tuition for any student coming from a family that makes less than $60,000. There is some aspect of that, but that’s obviously made up with other students who are paying the full freight. But in New York State, we give out $1 billion in tuition assistance program grant money and that’s to aid students who come from working class families. Our Excelsior Scholarship Program offers free tuition at SUNY and CUNY schools for all students coming from families earning $125,000 or less. We are making tremendous strides in making college affordable and accessible. I think that while there are places we can improve, surely in the consumer protection front, surely in the prepayment front, surely in the financial education front, we’re keeping our eye on the ball. I think we’re making good strides to get there.
Kyle Adams 21:37
We’ve just barely scratched the surface of student debt. There’s a lot more to learn. Brian will continue this series at rockinst.org. Brian, thank you so much for joining us today.
Brian Backstrom 21:52
Thanks for having me.
Kyle Adams 21:54
We’ll be releasing more of Brian’s research on student debt in the coming weeks and months, you can find it at rockinst.org, where I also encourage you to sign up for updates from the Rockefeller Institute. You can also follow us on Facebook, Twitter, and Instagram for all the latest public policy research and analysis. The students you heard at the top of the podcast, were UAlbany students recorded by our producer Alex Morse. Thank you to him and thank you very much to the students for sharing their stories. I’m Kyle Adams. Thanks for listening.
Alexander Morse 22:25
So, Kyle do you have student debt?
Kyle Adams 22:26
I do. Yeah.
Alexander Morse 22:28
How much are you paying a month?
Kyle Adams 22:30
I’m not going to say that here.
Alexander Morse 22:31
Is it more than 10 percent of your paycheck?
Kyle Adams 22:34
I’ll be paying that for a while.
Alexander Morse 22:36
Are you going to give me any real answers?
Kyle Adams 22:38
No. I ask the questions on this podcast.
“Policy Outsider” from the Rockefeller Institute of Government takes you outside the halls of power to understand how decisions of law and policy shape our everyday lives.
Listen to a full episode archive on Anchor, or subscribe on your preferred podcast platform.
