Student loan myth? Report says average monthly payments have remained stable over years
GRAND FORKS -- Average student debt in North Dakota may not soar above the national average, but it’s still a very real challenge for graduates.
“If we want to have a knowledge-based economy, which we must have to be successful, we need to continue to have access to college and not let finance be a barrier,” said state Sen. Tim Flakoll, R-Fargo.
Lawmakers and student debt officials said a student loan report released last week by the Brookings Institution reinforced some of their own observations, such as the growing number of student borrowers, but with more acquiring loans and higher interest and tuition rates, students still struggle.
The Brookings Institution report, “Is a Student Loan Crisis on the Horizon?” tracked the education debt levels and incomes of students for 21 years but included no individual state information. While student debt nationwide has increased for a number of reasons, the average debt load for a typical graduate is not as dire as popular media have suggested, the report stated.
For instance, extremely high debt levels – more than $100,000 – remain quite rare, and the average monthly payments for students have not increased over time, likely because borrowers are repaying debts over longer periods of time, it said.
The average debt for undergrads in North Dakota now is about $26,000 to $27,000, on pace with the national average of $26,000, according to various reports. More than half of undergraduates within the North Dakota University System received some form of financial aid in 2012-13, according to a University System report this year.
Still a struggle
The Brookings report acknowledges some borrower hardship due to loans but still finds “little evidence” to support perceived problems in the student loan market.
Some state officials disagree.
Although rising debt loads are caused by several factors — increased tuition, inflation and policy changes, such as lowered interest rates and longer loan terms — college graduates still earn more per year on average than high school students in the same age group, the report shows. On average, salary increases over a borrower’s lifetime helped offset the increases in borrowing, it stated.
In addition, there’s no evidence borrowers with high loan-payment-to-income ratios have consistently increased over the years, it said. High ratios were more common during the 1990s than the 2000s, it said.
U.S. Sen. Heidi Heitkamp, D-N.D., said she’s heard from students across the state who “feel stuck” because of the student loan debt they’ve accrued. Many students with outstanding debt have interest rates of nearly 7 percent on their loans, which make those loans harder to pay off, she said.
“If they can refinance to the rates that many current undergraduates are getting at less than 4 percent, that would make a big difference,” she said.
Flakoll, a member of the state’s higher education funding committee, said it’s still a problem, especially for the 20 percent of students who take out loans but don’t complete college. Without a degree, the earning potential and chances of getting a job are much lower, while health problems tend to rise, he said.
“The longer people are in education, the less they face those types of challenges,” he said.
State officials say they want to continue to keep college affordable.
For instance, Flakoll said he has pushed for more timely graduation rates and wants state merit scholarship funding to go directly to the campus on behalf of the student, which will help drive down tuition costs, he said.
State lender Bank of North Dakota recently started a program called Deal One, which allows borrowers to extend repayment or decrease monthly payments, said Eric Hardmeyer, the state bank’s CEO.
In the past five years, the number of borrowers receiving loans from BND has grown about 24 percent to 11,407 borrowers in 2013, according to BND.
“(Student debt) is obviously something we think about a lot,” he said. “We see people with large student loan debts are still living at home with their parents and obviously delaying the purchase of a home or a car.”
On average, University of North Dakota graduates have been in good shape in terms of debt. The percentage of undergrads receiving at least one loan (excluding any parent-assisted loans) has decreased, as has the loan default rate.
Since 2011, the rate has dropped 1.5 percentage points to 4.5 percent this year, said Sol Jensen, UND’s assistant vice president for admissions and financial aid. With the exception of UND’s aviation program, tuition for a full-time North Dakota resident at $7,740 this year is “extremely” affordable, especially when compared to similar institutions, he said.
“We have a lot of very highly sought-after graduates who get jobs quickly and in the fields that they’re looking for,” he said.