The Education Bubble, Part 2: Stricter Guidance Could Keep Loans At Bay

As college tuition costs keep rising, student loan debt has increased significantly. Two-thirds of students take on loans, with the average debt load now more than $23,000. And as there’s a renewed push for youths to attend some college, there’s also worry that debt levels and default rates will continue to rise as well. Part 2 of a WBUR Series: The Education Bubble.

BOSTON — Worcester's College of the Holy Cross and Simmons College, in Boston, are two private institutions in Massachusetts, but comparing them is like comparing apples to pears.

Holy Cross is the oldest Catholic college in New England. Simmons has an all-women's undergraduate school, along with multiple graduate programs. Holy Cross has a $500 million endowment; Simmons an endowment of $140 million.

More notably for this series, however, is that while Holy Cross actually costs more — with a total price tag over $50,000 — 2008 graduates left Simmons with more than twice as much debt as their Holy Cross counterparts, approximately $42,000 to $17,000.

A Visits To Simmons...

Annie Dunbar and Alicia Lochard just graduated from Simmons. The women are from New England, were high achievers in high school and liberal arts majors in college. They had some interesting reasons — reasons representative of their age at the time — for why they chose Simmons.

"I picked Simmons primarily because of their application," Dunbar says. "I know it’s lame, it’s lame. But the free application was a very big help."

Adds Lochard: "That's what brought me to Simmons. I wanted a free t-shirt, I didn't have to write an essay and I didn't have to pay for (the application)."

Their parents also had no experience with the American college system. Dunbar is Liberian. Lochard is the first in her family to go to college.

"When I was applying for college, I knew I had $15,000 that I did know where it was coming from," Lochard says. "I didn’t really understand debt. I didn't really understand interest rates. I had no one I could get assistance from. But when they approved me, I signed my name on the dotted line every semester for eight semesters, without any education about what the repercussions of that would be."

Lochard got some academic and financial scholarships, but still racked up about $80,000 in student loans. Some are federally issued, but much of her debt is in high interest private loans.

...And To Holy Cross

In the Hogan Campus Center at Holy Cross before finals, students grabbed a late afternoon coffee or studied. Even though the school has a relatively low average student debt load, the students probably didn’t think about how much and for how long they would be paying for college when they decided on Holy Cross. It certainly didn’t occur to graduating senior Jill Caughlin.

Student Loan Resources:

"I didn’t really think about it that much when I was 18," Caughlin says, "so I wasn’t really too concerned when I was graduating high school with the cost of college. It was something in the back of my mind that I knew I would eventually face coming down the road.

"I didn't really look into the financial aid packages at the other schools," she adds. "I applied early decision to Holy Cross. This was the only school that I really explored their financial aid options."

Caughlin has $20,000 in debt, which she calls manageable. It means she can go to law school in the fall and not feel overburdened by debt.

The Institutional Role

So while students had similar misconceptions before heading to different colleges, the real question is who's responsible when a student gets buried in debt? It's the student's, and the parents', too, of course, but colleges play a role. Some wonder if they are constantly on a building frenzy, among other spending agendas, driving up costs. Some simply wonder about how they counsel students about debt.

Holy Cross tries to be different. Its philosophy includes making education affordable and it actively discourages students and families from taking out private loans because they charge higher interest rates with interest that starts accruing right away.

"We come right out and we say, 'We do not view that as a viable option,' " says Lynn Myers, Holy Cross' head of financial aid.

That means Holy Cross tells some prospective students to find another school they can afford. And if an enrolled student needs private loans, they are called to Myers' office and counseled against it.

Simmons, on the other hand, takes a more hands-off approach.

"We’re not trying to encourage our students to take more debt than they should take," says Simmons President Helen Drinan. "At the end of the day, though, our students are adults. And if they decide they are going to take a loan, we're not going to tell them they can't take a loan."

"Last week I went to exit loan counseling. I don’t recall going to entrance loan counseling. There is a disparity."-- Alicia Lochard, Simmons College '10

Drinan says the school does not have a strict philosophy on student debt.

"Part of the reason for that is we don't have the resources to say, 'We don't want you to have more than X number of dollars of debt,' " Drinan says. "But we would definitively like to be in that position. It's the reason we're doing a lot of the things that we're doing."

Drinan says the school doesn't prohibit students from coming, though they can advise students that Simmons may not be the best fit. When pushed, though, she says they can just advise.

"This is a free country after all," she says. "You don't tell people what they can and cannot do."

Father Michael McFarland, the president of Holy Cross, compares that line of thought to underage drinking.

"If they want to drink, we can’t stop them, so just lower the age to 18 and let them drink," McFarland says. "I’m not in that school. I guess we are a little more paternalistic in that sense."

Holy Cross grads like that paternalism, it seems, because it’s consistently ranked as having the happiest alumni and its alumni giving rate is among the top 10 in the country.

Students at Simmons say they wish they had some of that paternalism. Simmons says it does offer help every step of the way in the financial aid process. But Lochard says it wasn't enough.

"Last week I went to exit loan counseling," Lochard says. "I don’t recall going to entrance loan counseling. There is a disparity. No one sat me down and said, 'This is what you’re getting yourself into.' I wish someone had said to me, 'You cannot afford this.' "