Sallie Mae's annual How America Pays For College results are in for 2008-09 and are causing quite a stir:
- New York Times: Survey Finds Many That Many Families Don't Borrow for College
- NPR: Fewer Students Borrow for College. Those Who Do Spend More.
- Chronicle of Higher Education: Fewer than Half of Families Paid for Undergraduate Education With Loans This Past Year, Survey Finds
Here is a summary of their results:
"The study found that among American families, 51 percent received grants and scholarships, 25 percent of students borrowed federal loans, 12 percent of students borrowed private education loans and 5 percent used credit cards to pay for college expenses. Fifty-eight percent of families paid for college last year without borrowing at all."
If we needed any further proof that little rigor or analysis goes into deciding how much debt a student decides to take on, the survey found that few had any idea of translating that debt into monthly payments:
"How America Pays for College found that 58 percent of families who borrowed did not take the student’s expected starting salary into consideration when deciding whether or how much to borrow. In addition, 23 percent of students could not answer when asked to estimate their future monthly student loan payment. The remaining 77 percent gave estimated future student loan payments that showed little correlation with the total amounts the students said they borrowed."
So, why do I doubt the results?
It has to do with data that the Dept. of Education released earlier this year about federal loan borrowing which showed federal loan volume rose by 20.8% in 2008-09 largely driven by an increase in the number of loans, which rose by 23.6%:
Market Share Analysis
Growth (2008-09 vs. 2007-08)
Data provided by NASFAA News:
Direct Loan volume as of Feb. 25, 2009 compared to last year's volume
|number of loans||4.5 million||2.9 million|
|total loan dollars||$20.2 billion||$13.1 billion|
Same for FFEL as of Feb. 26 2009
|number of loans||11.2 million||9.8 million|
|total loan dollars||$57.1 billion||$50.9 billion|
How to account for the fact that 3.0 million more loans and over $13.0 billion more in federal loan volume was taken out in 2008-09 and yet somehow the percentage of families who borrowed for college in the Sallie Mae study declined from 47% in in 2007-08 to 42% in 2008-09.
- For those who think the contraction of private loans account for the difference, it seems unlikely that this could account for this. Based on SLA's estimate of a $6-$7 billion decline in private loan volume for 2008-09, overall borrowing including both federal and private loans would still be up over $6-$7 billion or roughly 7%-8%.
- Or maybe it's a jump in enrollment accounting for the increase in borrowing? Nope. National Center for Education Statistics projected that enrollment in degree-granting institutions would remain flat in 2008 as compared to 2007 at 18.2 million students...
- Or maybe the average loan size increased while the number of borrowers decreased. Drats, that didn't happen either. In fact, the average loan declined by 2.3% to $4,924 in 2008-09.
So, how do I account for the difference: One word: METHODOLOGY. Here is how they describe it in their report:
Given a choice between a telephone survey of 1,604 people or data on 15.7 million federal loans, I would have to consider the latter a more reliable gauge of what actually happened in 2008-09. Perhaps, Sallie Mae relied too heavily on contacting their own private loan borrowers who took out loans in 2007-08, since many of them apparently didn't qualify in 2008-09 as SLM's private loan originations fell by 37.1% over that period.
Rather than rely on my analysis, I would love to hear from the financial aid administrators, or better yet, this seems well suited to an SLA Flash Survey. Anyone agree?
Let's see how long it takes someone in MSM to question the survey results. The clock is ticking...
Update (August 25, 2009)
Mark Kantrowitz, publisher of FinAid.org, just commented on the survey on the NY Times blog, "The Choice. He identified some differences in methodology between the Sallie Mae study and the NPSAS data which help explain the differences in results:
"The Sallie Mae survey focused on the percentage of families borrowing (or not borrowing) for college in the current academic year. According to the 2007-08 National Postsecondary Student Aid Study (NPSAS), 53% of students at 4-year public colleges and 41% of students at 4-year private nonprofit colleges did not borrow from federal or private education loans in 2007-08. However, more students borrow at some time during their undergraduate education than in any given year. Among students graduating with Bachelor’s degrees in 2007-08, 38.9% of students at 4-year public colleges and 29.4% of students at 4-year private nonprofit colleges graduated with no debt. Overall, only 13.7% of Bachelor’s degree recipients at 4-year colleges (and 34.6% of Associate’s degree recipients at 2-year colleges) graduated with no debt.