With a national student loan debt of slightly more than $1 trillion, American colleges may have to start re-thinking the way they do business.
Recent graduates of Catholic colleges are among those feeling the weight of student loan debt. Karissa O'Hearn and her husband Joe both graduated from Benedictine College in Atchison, Kan., a few years ago. As a student, Karissa said she did not realize how signing for loan after loan would affect her financial future.
“(Financial aid offices) let you sign a piece of paper saying you’re responsible for 30,000 + dollars in debt, but (they do not) take the time to tell you what that really means,” Karissa told CNA. “For the next 20+ years you could be paying that off, depending on who you marry or what job you get.”
According to Forbes, nearly 12 percent of all student loans are currently delinquent by 90 days or more, making them the type of debt most likely to be in default.
A recent limited-release documentary from CNN films entitled “Ivory Tower” even goes so far as to question the value of a college degree, given the present condition of loan defaults coupled with ever-increasing costs of tuition.
Students with tens to even hundreds of thousands of dollars in debt talked about their struggles to find any job, let alone jobs that would utilize their degrees and help them rise out of debt.
Some professors and experts featured in the film even wonder if there will be some sort of collapse within the college system, leaving the last schools standing to pick up the pieces and forge a more sustainable model of higher education.
If such a collapse were to happen, it is likely that private Catholic colleges, whose tuition is higher than state schools, would take a hit.
But like most national issues, the college debt problem is not simple, and neither are the solutions. CNA spoke with three of the nation's top Catholic colleges to see how they are dealing with the student debt crisis.
The struggle: A Catholic college student's view
Karissa O'Hearn represents a fairly typical situation for college graduates.
O'Hearn started out at the University of Nebraska-Lincoln (UNL), but transferred to Benedictine College in Kansas after her sophomore year. She was drawn to the close community feel and active faith life of the college every time she visited her then-boyfriend (now-husband), Joe, there.
“I felt really called to be at Benedictine even though there were really great things going on at UNL, it just seemed to fit, it felt like where I was supposed to be,” Karissa said.
She attended Benedictine for three years and earned degrees in special education and elementary education. Joe earned dual degrees in philosophy and theology a year earlier than Karissa, and the couple married soon after his graduation.
Finding a job after graduation was easy for Karissa, especially in the area of special education. For Joe, however, things proved difficult.
“He was working jobs a high school student could be easily hired to do, and that was really hard on him because he’s questioning, ‘What about my education? What is that value? How did I spend so much money on school and now I’m getting paid minimum wage?’”
The couple moved back to Grand Island, Neb., after Karissa graduated, where Joe worked as a phlebotomist for the American Red Cross. They then moved to Lincoln so Joe could work on his master’s in order to be able to teach philosophy at the college level. Between the move, taking on more loans for graduate school, and a new baby, the O’Hearns realized they were no longer able to afford the $1,000 a month that was going towards their debt.
They started to default on their loans. Even though Karissa was working full-time for Lincoln Public Schools, times were tight.
“We would be going, ‘Oh my gosh we can’t go get groceries, we can’t do this, we can’t do anything,’ we would be panicking because we were waiting for my paycheck to come in at the end of the month,” Karissa said, “and that was really a scary time for us, and it got so scary that we just stopped making payments on our loans completely, which is not good because our credit score starts dropping.”
After a year, Joe left grad school.
“It was just putting us further into debt because he couldn’t get funded, and the guarantee for a job as a philosophy professor just isn’t there,” Karissa said. Their combined debt now is “well over $70,000.”
Going into college, Karissa said she felt unprepared and uneducated about what it would take to afford college and how loans would impact her finances years into the future. Taking out more loans to afford another semester sounded like a good idea at the time.
“For me it was like ‘oh okay, there’s my answer to that prayer, I’ll take out a loan,’” she said.
Karissa also said the college system seems to favor the very disadvantaged and the upper middle class, while the lower middle class seems to struggle the most.
“You have people like myself and Joseph and tons of other people that are lower middle class, where our parents didn’t go to college, they don’t prepare, they don’t have a college fund waiting for us, they don’t have all these things,” she said.
Finances have become the topic of conversation among fellow Benedictine graduates who are going through similar struggles.
“When we talk about the stress of adulthood, that’s what we talk about, we don’t talk as much about kids and other financial things, we talk about our loans,” she said.
If she could go back, Karissa said she would have thought to try to earn better grades in high school. She would have thought to be educated on the financial terminology surrounding college loans. And, she would have been more up front in asking about the real cost of private college over three years.
“I would have been fine at UNL, I fit in well enough there, but it’s hard because when you’re discerning it’s like, ‘What does God want from me?’, the first thing you don’t want to think about is finances,” she said.
“You think, ‘Oh God has all the money in the world so I’m not going to think about finances,’ but in a lot of ways we’re still called to be responsible for our finances and that is of God too.”
“I really value my time at Benedictine, I’m so grateful for it, I’m so grateful for the lifelong friends that I made there, and for the encounters I had with Christ there,” Karissa said.
“But I don’t know, had I recognized the financial burden, I’m not sure if my educational decisions might have been different.”
Since the O’Hearns have graduated, Benedictine College has responded to the need for students to be more educated about loans and financial terminology.
Tony Tanking, director of financial aid at the school, said he started teaching a class on personal finances last year.
“We’re trying to touch base with more students at an earlier stage by incorporating some financial literacy within our curriculum,” Tanking told CNA.
“Not only do we go over aspects of different parts of their lives with regards to applying for loans and dealing with credit cards (in the class), we also go over terminology and aspects of student loans that those students will be dealing with when they get out of school.”
While the class is currently an elective, it is something Tanking hopes becomes part of the required curriculum for every student.
The increasing expectations students have for a college experience is part of what keeps costs high, he said. Students at Catholic colleges are looking for what a college can offer them academically, spiritually and socially.
“When you take into account all of those things, it’s a challenge for the school because while you’re providing a high level of performance for those students, you also have the accountability of keeping up on buildings, making sure that you’re staffed properly, and making sure that you have competitive wages for your faculty,” Tanking said.
Students who are concerned about their finances should establish a relationship with their college’s financial aid office early on, he suggested.
“Focus on communication, don’t be afraid to ask questions. Talk to your financial aid office, that is an office that is available for free for the students to come in, whether they come in as a freshman or as a sophomore or junior or senior,” Tanking said.
“If they develop a relationship with that office, that office has their information and can help them with understanding what their situation is.”
Tanking said he even has students who will call him and ask for financial advice after they’ve graduated.
“There’s no greater satisfaction than knowing I’ve had an impact on these students and I’m helping them,” he said. “So keep communicating, keep communicating.”
Ave Maria University
Ave Maria University, a Catholic college in Florida, announced in the fall of 2013 that they would be cutting their tuition by $5,000, effective for the 2014-2015 school year. Jim Towey, president of Ave Maria University, said he believes colleges have a moral responsibility to keep costs low.
“You have to look at the morality of a system of higher education that’s placing so much debt on the shoulders of our graduates, even if they’re willing to borrow the money,” Towey told CNA. “You have to ask questions about whether it’s right for a system like that to lead to that outcome.”
Part of the reason Ave Maria University was able to make cuts is the fact that it is still a relatively new and growing university.
“We made a number of cuts back in 2011, we cut our budget by 3.6 million dollars, we laid off a couple dozen people and eliminated positions,” Towey said. “We went through a process of right-sizing the university. I don’t think a lot of universities ever go through that exercise but when you’re a young university you can.”
The process of right-sizing included evaluating the worth of some administrative positions, as well as making sure professors were teaching a full class load.
“Some of these universities where a professor’s teaching one class a semester, is that working for the professor? Sure. Does that help his research? Sure. Does that drive up the cost of that education for the students? Yes,” Towey said.
The current average debt of an Ave Maria graduate is around $22,000, almost $10,000 lower than the average private college graduate. One way the college protects potential students from over-borrowing is by looking at their ability to pay before they are accepted to the school through a program called CAP.
“Are they a fit with our Catholic culture, that’s the ‘C’. Are they academically capable of succeeding, that’s the ‘A’, and ‘P’ can they pay?” Towey explained. “And sometimes private, non-profit universities will admit students where there’s a real question as to how that family is going to afford four years of that education.”
The University of Dallas
Despite the national default rates, there are several people in the field of higher education who say things are not nearly as bleak as they appear. A recent New York Times piece examined many of the cliché arguments surrounding the issue, finding that tuition prices have actually not out-paced inflation as is often believed. Most students still carry a moderate amount of debt, with the highest burden falling on those who drop out. History, the article says, is still on the side of those who earn a degree.
Taryn Anderson, director of financial aid for the University of Dallas, agrees that the issue has been blown out of proportion recently.
“I was at a conference last week for NASFA (National Association of Student Financial Aid Advisors) and they had done some research based on some of the media that was coming out,” Anderson told CNA, “(and they) found that the types of loan debt that are featured in the media, of people who have $100,000 or $200,000 is not the norm, it is a very small percentage that actually have that.”
The national average debt burden a student borrower graduates with is close to $30,000. Students who graduate with loans from the Catholic honors college in Texas are on par with that.
“(Student) debt upon graduation for us is not higher than the national average...and our cohort default rate is much lower than the national average,” Anderson said, “which to us signifies that the degree is worth that amount of borrowing.”
“Now, is it worth double that? Probably not. I don’t think it’s worth borrowing $80-$100,000 and most students are not doing that.”
Part of the debt problem, she said, are families and students who are willing to over-borrow, even despite advice not to do so. Anderson – who meets with potential UD students who are looking at borrowing – says the current system in place requires that she allow students to take out loans regardless of amount.
“The way the federal government is set up, we have to give them our cost of attendance, and we have to allow them to borrow up to that much and we have no say in stopping them from doing that,” Anderson said.
And while Anderson said she tries to help as many students stay at UD as possible by getting creative with financial aid and housing arrangements, she is not afraid to be honest with students.
“I’m not opposed to telling the family this is not the right school for them. I’m definitely not telling the family we’re the cheapest option and they’re going to have to borrow wherever they go,” Anderson said.
Like many of her co-workers, Anderson has attended Catholic school all of her life and deeply values what UD can offer in terms of academics as well as spiritual formation. There are a lot of ways to make Catholic college affordable, even if it means not choosing UD, she said.
“There are options even among Catholic schools that are less expensive, there are options that are closer to your home,” she said. “There (are) great Catholic universities all over the country so even just within choosing a Catholic university there are ways that families can keep their costs down.”
Editor's note: The original version of this story read: The current average debt of an Ave Maria graduate is around $22,000 a year, almost $10,000 lower than the average private college graduate. That has been changed to reflect that Ave Maria graduates have around $22,000 in debt total upon graduation.