Escaping the debt trap

By Neil D. Theobald

I recently had the opportunity to speak before the state Senate and House appropriations committees and make the case for continued public support of Temple University. The questions from legislators - always valuable because they provide insight into the concerns of Pennsylvania's citizens - had a central theme: How do we hold down students' college costs and ensure our young people have realistic expectations for their role in the workplace?

The solutions are complex, but by no means insurmountable. Temple is focusing on three initiatives that will make a difference: promoting four-year graduation, building financial literacy, and creating realistic postgraduate planning.

Colleges must focus our students on graduating in four years. For too long, the six-year graduation average has been the industry standard for charting success. This must change.

At Temple, students who graduate in six years owe an average of $12,400 more than those who get their degrees in four years. That's because students who take longer than four years run out of government grants and must take out additional loans to pay for their living costs. The students who stay beyond four years also delay their entry into the workforce. In turn, their higher debt delays decisions on everything from getting married to buying a home.

Temple is tackling this problem with a new initiative called Fly in 4. This fall, students who sign up for Fly in 4 will commit to graduating in four years. They agree to register for classes early and take classes when they are offered. In return, Temple will make classes available when they're needed and give students the academic advising and progress tracking to make sure they stay on course to graduate in four years.

If students fulfill their commitments and still need classes at the end of four years, Temple will pick up their tuition bill.

Fly in 4 also has a unique financial component. Many Temple students who take longer than four years to graduate (particularly, students from middle- and low-income backgrounds) do so because they must work 30 or more hours each week at off-campus jobs to make ends meet. To alleviate that problem, Fly in 4 will discount tuition by $4,000 - the equivalent of earnings from 20 hours per week of off-campus employment - for 500 students with the highest need in each incoming class. The goal is to allow these students to shift their focus from commuting and working off campus to completing their degrees in four years.

The second step involves helping students learn how to make good budgetary decisions. Too many students come to college believing their credit cards are just as good a source of cash as a federally backed low-interest loan. Of course, a federally backed loan doesn't have to be paid back until six months after graduation, while credit card interest grows monthly.

The fact is, if students are going to make good financial decisions, they need to know the basics of managing a personal budget. That's why we have created a series of five financial literacy courses on the basics of budgeting, taking out a loan, and planning for the future. Personal financial literacy is not the kind of lesson we can put off until graduation.

Finally, we must better educate students about how much they could earn depending on their course of study. The good news is the return on an investment in a bachelor's degree is the highest it has ever been. There are multiple studies that show that a student with a bachelor's degree will earn $1 million more in her lifetime than someone with only a high school degree - but that $1 million is an average and varies greatly according to career.

Our surveys of entering students show that, too often, they have unrealistic expectations of the likely earning potential provided by various degrees. Simply put, too many students have very little understanding that the return on their degree will vary by major. We want students in their first year of college to have accurate expectations about their earnings potential, and to manage their borrowing, so they won't be surprised at graduation.

That is why Temple has heavily invested in enhanced academic advising. Our goal is not to point everyone into the highest-paying fields. Instead, we have an obligation to ensure students make informed decisions based on what they can realistically expect to earn when they graduate.

While the debt load of Temple graduates is already among the lowest in the city, we must help our student population take control of their financial future. Informed choices in college will reduce loan debt and facilitate seamless transition into successful adulthood. We are dedicated to ensuring that every Temple student will graduate with a plan for his or her life that will be rewarding in every sense of the word.