Student debt crisis

Why it’s everyone's problem and what VCU is doing to help

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Note: This article originally appeared in the summer 2016 VCU Alumni magazine. Active, dues-paying members of VCU Alumni receive a subscription to the magazine as a benefit of membership. To read the whole magazine online, join today! For more information, visit vcualumni.org.

It’s a sobering statistic. In 2015, the average U.S. college student graduated with a student-loan debt of just over $35,000, according to an analysis of government data by Mark Kantrowitz, publisher at Edvisors. That’s the most indebted class ever. At Virginia Commonwealth University, efforts are underway to reverse this trend. From peer-to-peer counseling to programming that underscores the savings associated with graduating on time to scholarships made possible through donor support, the university is working to stop this crisis in its tracks.


As a rising VCU sophomore, Ashlea Brunson received a stark reality check when she discovered that her parents took out a $10,000 loan to cover the costs for her first-year tuition. To a family with a combined income of about $50,000, financing Brunson’s education was inevitable. To the journalism major, realizing that she might face more than $40,000 in debt upon graduation was devastating.

“I don’t want to take out more loans,” Brunson says. “But my parents don’t have the money to help me, and I literally have no other means for completing college.”

So she works two jobs to cover room and board, food and other living expenses, while she draws on student loans to cover tuition and to tide her over when she comes up short on finances. She doesn’t have a car so she uses public transportation and works on campus. Her tax refunds go to books, and she admits that, even with loans, she’s barely making it. Any little mishap could spell disaster.

“There have been times when I’ve taken more than I needed [through loans],” she admits. “Because I knew that I couldn’t just call my parents and ask them for $100 when I needed it. Those moments could sink me.”

Last semester, Brunson, now a junior, admits that necessity got the best of her. Stuck between making grades or making rent, she slipped. After posting numerous failing grades, she essentially lost a semester. Once slated to graduate in May 2016, she is now aiming for 2017, if she can gather enough financial momentum. With at least two semesters to go, her debt now tops $40,000, not including interest.

Twenty years ago, Brunson’s experience would have been an outlier, but these days mounting debt is a norm among college students, partly because of state cutbacks in per-student funding for higher education. Not only are colleges and universities receiving less funding, but also less financial support is available to students like Brunson.

According to “Student Debt and the Class of 2014,” a report pro­duced by The Institute for College Access and Success, in Virginia between the years of 2001 and 2014, state funding per in-state student declined by 46 percent at four-year colleges. Meanwhile, there’s little doubt how those cutbacks impacted students, as student debt rose by 56 percent in the same period. The State Council of Higher Education for Virginia reports that in 2014-15, the average debt for in-state VCU undergraduate students was $28,425, just slightly above the statewide average of $28,250.

But, squeezed between decreased state funding and increasing tui­tions, the university isn’t content with handing the issue of rising debt over to its students. Instead, starting in 2015, the university is attempting to reverse those trends through numerous initiatives aimed at increasing the financial literacy of its students — a move that Brunson suggests could have helped her at the onset.

“We can say to students, things like, ‘Please, don’t pay for that hamburger for 10 years,’” says VCU School of Business instructor John McFarland. “And, of course, they look at you funny. But the point is, if you’re living off of student loan money, and you’re buying that hamburger, you’ll be paying for that hamburger for 10 years because that’s how long you’ll be repaying your student loans.”


Getting through to students

Financial literacy efforts are nothing new for the university. Upon enroll­ment, VCU students are met with numerous opportunities for raising their financial IQs. On the Division of Strategic Enrollment Management’s financial aid website, for instance, students can find information on resources such as federal work-study programs, which allow them to earn wages as they study through specially arranged positions both on and off campus.

Financial Aid TV, a series of short web-based videos, provides infor­mation ranging from how to apply for financial aid, to topics like using credit cards, money basics and identity theft. “How can I save money on coffee?” is a 22-second video encouraging students to total how much they spend on coffee per week, then compare that with the cost of purchasing and using a coffee maker. Another explains how purchasing one bottle of water per day can equate to $300 to $400 per year in total costs.

Those are just some of the messages that McFarland and nine students who are freshly trained as money coaches aim to convey to students through The Money Spot at VCU, a new peer-to-peer counseling center.

“They can come and talk to us about literally anything,” McFarland says. “And that’s what we want.”

And while the impacts of the costs for bottled water and takeout coffee might seem basic in the face of an issue as large as a student debt crisis, McFarland and other experts who’ve studied the issue all say that relating those expenses to debt forces students to consider how their choices affect their financial futures. They also say that the need for financial literacy among college students cannot be overstated as a component of the student debt crisis. Case in point: A nationwide study including seniors from 100 colleges found that 50 percent weren’t even aware that they’re required to begin repaying their student loans within six to nine months of graduation. And at least one of The Money Spot’s student coaches, Prashant Bishwakarma, a junior finance major, says he’s spoken to students who were completely unaware that they have to repay their student loans at all.

“They’re seniors. They’re about to go out into the world and be finan­cially responsible for themselves, and they just weren’t even thinking about it,” McFarland says.

Students access help by visiting The Money Spot’s location in Hibbs Hall, or via its Facebook page, email or hotline, but McFarland says that the program isn’t waiting for students to reach out. Instead, counselors regularly provide 10- to 20-minute presentations in VCU’s student housing locations, followed by immediate opportunities for one-on-one counseling.

“By creating a program like this, if we can reduce the amount of money that’s being borrowed, we’ll put people in a better position,” McFarland says.


Opportunities for bigger savings 

With VCU’s graduates entering the workforce with student debt in tow, borrowing is a seemingly necessary part of higher education. But in some cases, McFarland says, students are lining up to borrow the full amount of what’s available to them, with no regard for their actual financial needs.

“Most students aren’t thinking about 10 or even five years down the road, so helping them to do that is key,” Bishwakarma says. “For instance, we can explain how paying the monthly interest payments on your [stu­dent] loans while you’re in school can save you thousands and thousands of dollars once you’re out.”

In addition to the potential for overborrowing (which inevitably leads to overspending), many students don’t take into consideration the full cost of attendance — beyond just credit hours — when registering for classes, thinking that they’ll pay the same amount in tuition, whether they spread the typical 120-credit curriculum over four years or six years. Do the Math, a universitywide campaign launched in fall 2013, outlines that by adding just one extra three-credit course (enrolling in 15 instead of 12 credit hours) a semester, students can subtract as much as $50,000 from their debt load.

The math behind the campaign is simple: Twelve credit hours is consid­ered full time, but over the course of four years that number compounds to just 96 credits, 24 short of what’s required by most undergraduate programs. A student needs to enroll in 15 credits each semester to graduate in four years. Do the Math’s $50,000 estimate is based on the cost of attendance for additional semesters, which includes standard tuition and fees, books and supplies, room, board, transportation and miscellaneous expenses.

Luke Schultheis, Ph.D., vice provost for the Division of Strategic Enrollment Management, suggests that those figures could be conserv­ative, when taking into account the wages that students forego by sitting out of the workforce for additional semesters. For this reason, he says that number could easily exceed $100,000.

At its core, Do the Math is little more than a basic marketing campaign. But metrics show that student awareness has already increased, and the effort has made a significant difference. The year before the campaign began, Schultheis says 62 percent of freshmen enrolled in 15 or more credit hours. Now 83 percent of freshmen do so. If these trends continue, more students will graduate in four years, continuing to drive up VCU’s already increasing graduation rate, and the overall student debt load will actually decrease.

“We have already seen the debt load level off at VCU while it has increased significantly at peer institutions,” Schultheis says. “It’s nice how this has become such a part of the fabric of the institution. You hear faculty and deans talking about it all of the time, so it’s really become something that rolls off of everybody’s lips on a regular basis.”

The success of the campaign also has captured the attention of other colleges and universities. (The day Schultheis was interviewed for this article, he was returning from a trip to Washington, D.C., where he spoke to the financial aid directors for eight universities.)


More than financial

Ultimately, the ways in which debt impacts the lives of students and grad­uates goes well beyond finances.

“There are all sorts of cultural effects that you may not realize,” McFarland says. “When you create your first real relationship and mar­riage, when you have your first child, those ages are going up. These ripple effects should have nothing to do with the costs for education.”

But, McFarland says, studies show that they do. And watching their debts increase also is impacting students’ decisions before graduation.

“The questions are: When is the burden [of debt] too much, at which point do students feel that they’re getting into trouble and how do they respond to that?” says Richard Spies, a lead author for “The Effects of Rising Student Costs in Higher Education,” a report produced by Ithaka S+R, a strategic consulting and research service that’s based in New York City.

Marsha Rappley, M.D., vice president for VCU Health Sciences and CEO of VCU Health System, says that some medical students are responding by pulling away from the disciplines they love and toward more lucrative fields. “The cost for education is beginning to shift people away from the specialties they’re most passionate about and feel a part of,” Rappley says. “We want students to go into pediatrics, primary care, cardiology or thoracic surgery because they love doing those things. We don’t want them making their decisions based on economic factors.”

And those decisions could be prompted at the time of enrollment, or they could occur at the grocery store. Meanwhile, data show that lowering students’ expenses by even $1,000 per year can significantly undo those change-of-mind moments.

“You cannot underestimate the impacts of every little bit of help you can get,” says Abraham Butler, a fourth-year VCU medical student. “Today, a little bit of that money is going to allow me to buy groceries,” he says of the money he receives as the recipient of the A. Jarrell Raper Memorial Scholarship. “Then there’s gas and all of the other day-to-day things. It’s a tremendous help.”

Before he received a scholarship, Butler had nearly reached his tipping point. Just as his sister was wrapping up her medical training, Butler’s father lost his job, and the family found itself supported by his mother’s salary as a schoolteacher.

“There came a point when I wondered if it would be best for me to select a different direction,” says Butler, who at the time was completing his undergraduate studies at Tuskegee University.

Lucky for him, he didn’t have to make such a hard decision. He was selected for a scholarship, while his father also found new employment. Gwynn Raper Litchfield, widow to the namesake of Butler’s scholarship, says her family is so pleased that the scholarship, established by Dr. Raper’s former classmates and supported by family and friends, made a difference.

“We’re pleased and proud that the scholarship enables these young people to reach their goals and helps them to get into the practice of med­icine, which is a benefit to society,” Litchfield says.

Ways to Give

Support from our donors and friends isn’t measured only in the amount of contributions given to the university. Support also is measured in the lives of students that are changed through donations. Our students are changing the future, and private giving steers their path to success. To learn more about how your gift can help today’s and tomorrow’s students, visit support.vcu.edu.


It’s our problem

Make no mistake about it: The trending direction among student debt figures not only points to significant trouble for college grads but also to a potential financial calamity for all Americans. Data published by the Federal Reserve Bank reports that, over the past 10 years, the share of student loan balances 90 or more days delinquent increased from 6.7 percent to 11.7 percent. Meanwhile, FRB also reports that, over a 10-year period ending in 2016, the amount of student debt owed by American households had increased from about $450 billion to more than $1.1 tril­lion, surpassing credit cards as the largest class of nonhousing consumer debt. Meanwhile, experts suggest that state cutbacks, which continue to contribute to the issue, might never be reversed.

“As a nation, we’re disinvesting in education, and unfortunately, that’s a pretty powerful message to our young people,” Rappley says. “When an alumnus or someone from the community donates to a student scholarship, it not only helps to decrease their debt, but there’s also a very powerful message that says, ‘I believe in you and the choice you’ve made for your life, so I’m going to help you to accomplish that.’”

And that, she says, is a beautiful counterpunch.