A presentation to the UW System’s Board of Regents Thursday afternoon on financial aid and student costs was not only informative, but a little scary for anyone hoping to someday help send kids to college.
“Save your brains out,” Susan Fischer, director of financial aid at UW-Madison, said afterward when asked for any tips she’d offer to parents. “I’m not going to say how or where, because I’m not a financial advisor. But start saving now.”
Fischer, the directors of financial aid at UW-Milwaukee and UW-Oshkosh, and Mark Nook, the interim senior vice president for academic affairs for the UW System, facilitated a two-hour discussion with the Regents about the costs of going to college, financial aid and student debt.
The skyrocketing costs associated with obtaining a degree and college debt, in particular, are hot topics these days.
Since the start of the year, President Barack Obama has stressed the need for leaders of higher education to find ways to rein in college costs. And earlier this week, the Federal Reserve Bank of New York reported that young people now owe significantly more on student loans ($870 billion) than Americans owe on credit card debt ($693 billion) or auto loans ($730 billion).
Nook notes the reason for this, in the most basic terms, is a 30-year trend of decreasing state support per each student enrolled in the UW System, plus increasing tuition without an equivalent jump in total grant dollars.
The end result is eye-opening: 62 percent of in-state students earning an undergraduate degree from a UW System institution back in 1984-85 left school with debt. Of those, the average amount owed was $5,954.
In 2010-11, 71 percent of in-state students earning an undergraduate degree from a UW System institution left school with debt. Of those, the average amount was a whopping $27,004.
“Great data. Great presentation,” Regent John Drew of Milwaukee said as the discussion was winding down. “But not a lot of good news here and I don’t think we’re moving toward sustainable, quality higher education.”
The main source of grant aid for UW System students is the federal Pell Grant, with more than 43,000 students receiving an average of more than $3,700 in 2010-11. These dollars can be awarded after a family fills out the Free Application for Federal Student Aid (FAFSA) form. This form consists of more than 100 questions regarding everything from a student's and family’s assets and income, to the number of people in that household. The information is plugged into a formula that determines what’s termed an Expected Family Contribution -- or the amount of money the government believes a family should be able to pitch in to help their kid pay for college.
The state also offers Wisconsin Higher Education Grants -- with 30,000 UW System students being awarded an average of nearly $2,000 in 2010-11.
Yet even after these dollars are awarded, the average unmet need (cost of attendance minus the Expected Family Contribution) without loans for students who display need was $9,191 per UW System student in 2010-11.
“At the end of the day, there just aren’t enough funds to go around,” says Jane Hojan-Clark, who is UW-Milwaukee’s director of financial aid.
Indeed, money is scarce all around these days.
When Gov. Scott Walker signed his 2011-13 biennial budget over the summer, it cut $250 million in state support for the UW System -- tying the record hit that former Gov. Jim Doyle included in his 2003-05 budget. Things went from bad to worse earlier this year when the Walker administration announced that the UW System must absorb another hit of $46.1 million over the first six months of 2012 to make ends meet.
“Do the decision-makers in this state want to educate the people of Wisconsin or not?” Regent David Walsh, a Madison lawyer, said after the presentation. “I understand we all have to pull in our belts, but everyone knows it would be good for the state to have more baccalaureate degree holders. It would be nice if we could be given the tools to accomplish that without forcing these young people to mortgage their lives.”
Interestingly, there is a growing number of students who are taking out loans even though the federal government’s calculations don’t classify them as being in need. In 1984-85, 21 percent of loans taken by Wisconsin resident undergraduates were of the non-need variety. But that figure jumped to 48 percent in 2010-11.
University officials say it’s difficult to pinpoint why, exactly, so many are borrowing money when -- according to the federal formula -- they don’t need to. But there is no shortage of theories.
First, Nook notes that the Expected Family Contribution “isn’t really about trying to figure out what a family can pay -- it’s more about figuring out how to ration the dollars that are available in Pell Grants and federally subsidized loans.”
In addition, the economic slump has mangled some families’ finances to the point that, even though it looks like they can help pay for college, they can’t. And some parents who could help out financially simply cut ties after a kid turns 18.
Fischer also notes a growing perception that some students simply enjoy a higher standard of living than past generations did.
“When I went to college, my parents ate wieners and beans casserole for six or seven years, because there were three of us,” she says with a laugh. “They drove second-hand cars and the whole family sacrificed. Now, that’s still happening with some families but, generally speaking today, that’s not there.”
She adds there are also times when parents need to be a little more realistic and financially responsible.
“I’ll hear things like, ‘But we always promised Suzy she could be a Badger,’” says Fischer. “And this is an out-of-state family and it’s going to cost them $40,000 per year. Let’s be realistic, too. You can get a great education someplace without having to pay that kind of money.”
The UW-Madison campus, in particular, is making some headway in producing more need-based financial aid. In fall 2009 the university instituted the Madison Initiative for Undergraduates -- a tuition surcharge that has grown by $250 per year for in-state students and $750 per year for out-of-state students. This hike has been on top of annual 5.5 percent tuition hikes, with the funds being used to restore faculty positions, support student services and provide more need-based financial aid. All students who are eligible for need-based financial aid and whose families earn $80,000 or less receive grants to offset this supplemental tuition charge.
Before the program started, UW-Madison itself offered less than $5 million per year in need-based grants -- by far the lowest amount among Big Ten Conference institutions. By next year, Fischer says that figure should top $20 million thanks to the Madison Initiative for Undergraduates.
She says those much-needed dollars have helped the university give 7,600 students at least some institutional grant aid this year -- with 3,000 students receiving this aid for the first time.
“We actually had some people think it was a scam and call the provost’s office wanting to make sure they weren’t going to have to repay the money,” she says. “So that’s sweet, and horrible, at the same time.”
Indeed, there is every bit as much bad news as good when it comes to college costs, financial aid and student debt.
“All decision-makers in this state need to have a conversation about whether or not they want the people of Wisconsin to have maximum access to public education,” said Walsh. “And if not, they ought to stand up and say so and see if they can get elected on that basis.”