For Release: Debt to Degree

Washington D.C. — The American higher education system is plagued by two chronic problems: dropouts and debt. Barely half of the students who start college get a degree within six years, and graduation rates at less-selective colleges often hover at 25 percent or less. At the same time, student loan debt is at an all-time high, recently passing credit card debt in total volume. Loan default rates have risen sharply in recent years, consigning a growing number of students to years of financial misery. In combination, drop-outs and debt are a major threat to the nation's ability to help students become productive, well-educated citizens.

The federal government has tracked these issues separately by calculating for each college the total number of degrees awarded, the percentage of students who graduate on time, and the percentage of students who default on their loans. Each of these statistics provides valuable information, but none shows a complete picture.

In a new Chart You Can Trust, Debt to Degree: A New Way of Measuring College Success, Education Sector has created a comprehensive measure, the "borrowing-to-credential ratio." For each college, authors Kevin Carey and Erin Dillon have taken newly available U.S. Department of Education data showing the total amount of money borrowed by undergraduates and divided that sum by the total number of degrees awarded. The results are revealing.

• Nationwide, the overall borrowing-to-credential ratio has risen sharply in recent years. The average amount of student debt needed to produce a degree in America is increasing rapidly. In 2006–07, students borrowed $13,334 for every credential earned. In 2007-08, that amount rose to $14,560, a 9 percent increase. In 2008–09 it rose by another 24 percent to $18,102.
• There are significant differences among the various sectors of higher education. the average ratio at public four-year universities was $16,247. At private nonprofit colleges and universities, it was $21,827. For-profit universities, by contrast, produced $43,383 in debt for every degree.
• Some elite colleges and universities are making good on their pledge to help low- and middle-income students graduate without major financial burdens. The average debt for a Princeton graduate, for example, is $2,385. The borrowing to debt ratio at New York University, however, is $25,886—exceeding that of some for-profit colleges.

Increasingly, borrowing is the norm in higher education. However, as Debt to Degree points out, there are steps that institutions can take—for example, readjusting financial aid to focus on students who need it most and taking action before students drop out. Government can also play a role. Carey and Dillon cite the recent "gainful employment" regulations by the Department of Education as one example of a policy that can help reduce the debt burden for students.

Read Debt to Degree: A New Way of Measuring College Success.

###