By Barbara Pash
With student loan debt approaching a national crisis, Maryland educators and financial literacy advocates are moving to address the issue – some mandated to do so and others voluntarily.
“The situation is getting worse quickly because students are racking up more debt than in the past. Colleges are dishing out more aid because the economy is so bad,” said Deanne Booker, communications manager of the Consumer Credit Counseling Service of Maryland and Delaware, a nonprofit community organization.
Booker estimates that the average student debt upon graduation is about $23,000 for both private and public four-year institutions. “States are responding because of the outcry from students’ parents,” she said.
Problem affects all ages, incomes
Robin McKinney, director of the Maryland CASH Campaign, a nonprofit financial literacy organization, has begun collecting data about student loan debt because of the significant debts its counselors are hearing about.
McKinney said the debt applies across the board: to all income levels, to all ages from recent graduates to adult learners, and to all types of schools from community colleges to graduate level.
“We see a red flag and we have started to dig,” said McKinney, who plans to analyze the data in the hopes of future state legislation.
Recently released data from the U.S. Department of Education showed student loan defaults at almost 9% for a two-year period ending in 2010, versus 7% for the previous period. Maryland’s rate was a few percentage points lower than the national rate but still higher than it had been.
U.S. student loan debt reportedly amounted to over $900 billion, more than the total amount of credit card debt.
New curriculum on financial literacy
Starting this month, Maryland public high school students in grades 9 to 12 are supposed to be learning how to evaluate public and private financial options for college and further education as part of a new curriculum on financial literacy, said Lynne Gilli, of the state Department of Education, program manager division of career and college readiness.
The topic “was brought up because of concern about potential loan problems,” said Gilli. The department is partnering with the Maryland Higher Education Commission on a $152,000 grant to implement a number of resources for students and parents on college loans.
The bill requested but did not mandate loan education at the post-secondary level.
The State Board of Education mandated and the education department has developed and is implementing a financial literacy curriculum for grades 3 to 12.
Del. Dana Stein, a Baltimore County Democrat who co-chaired a financial literacy task force that studied the issue, said there was plenty of testimony about the unhealthy level of student debt in the state. “It’s an emerging issue. That’s why we recommended public and private colleges provide information,” said Stein.
At the community college
At the community college level, according to Melissa Gregory, director of student financial aid at Montgomery College and chair of the financial aid group for the Maryland Association of Community Colleges, nearly all of the state’s 16 community colleges have student loan information sessions, either individually or in groups, for incoming students.
“We’ve gone further than the basic” information that the federal government requires of first-time federal loan borrowers, Gregory said, adding that several community colleges also review existing student loans of incoming students, some of whom have racked up five-figure debts and not obtained a college degree.
In fiscal 2009, the most current figures, the default rate at community colleges in Maryland ranged from 5% at Howard Community College to 21% at Garrett Community College, with most in the 8 to 9% range, Gregory said.
Low default at private schools
Tina Bjarekull, president of the Maryland Independent College and University Association (MICUA), said the 16 private, nonprofit colleges and universities in the state have an overall 1.6% default rate, the lowest in the country.
Nonetheless, MICUA members have taken action at the request of their financial aid officers who, because of the lack of local lenders and the misinformation students were receiving, “we’re telling us horror stories about students borrowing at a 19% interest rate,” she said.
She added that college presidents were also worried about the scarcity of banks and credit unions that offered student loans. “Students were turning to the Internet and borrowing money at not good terms,” she said.
To address the situation, in 2010 MICUA launched the online Maryland Student Loan Marketplace with information about federal financial aid and comparisons of private vendors that agree to MICUA’s requirements about disclosure and terms. So far, four banks and seven credit unions are participating. Other states are launching similar sites.
At the University System of Maryland, Andy Clark, director of legislative services, said student loan default is not a major issue. “The horror stories you hear are usually in relation to institutions outside the public university world,” he said of for-profit institutions and vocational schools.
At the University System, 85% of student loans are from the federal government, with the remainder from private loan sources and scholarships and gifts to the university.
“It’s hard for state legislators to get a handle on [student loan default] because state loans are a very small part of financial aid. Most are from the federal government,’ said Clark. “That’s why Stein has taken the financial literacy route, not loan reform.”