Nashua Telegraph on August 17, 2012
By Cameron Kittle

Tara Payne and her colleagues at the New Hampshire Higher Education Assistance Foundation have seen too much.

They know the horror stories: students who take out close to $100,000 in loans and graduate without a direction, or families who struggle to make college tuition payments for one year, let alone four.

Hearing so many hardships has an influence.

“We have a couple folks in our office who don’t have children yet, but they have already set up 529 plans for the future,” said Payne, vice president of college planning at NHHEAF.

A 529 plan is designed to help families set aside money for the future costs of college. New parents who start a college fund for their baby used to be ahead of the curve, but now they might be behind.

The number of 529 savings plans in the U.S. has jumped 53 percent since 2005 – up to 9.5 million plans across the country as of December 2011, according to the Investment Company Institute.

The trend follows the rising curve of college costs, which have more than tripled in 20 years for in-state students at the University of New Hampshire, Plymouth State University and Keene State College. College graduates from the Granite State now bear the highest average student debt burden in the country, according to the Project on Student Debt.

Education advocates say it’s a lack of state funding, and legislators point the finger back at universities, claiming inefficiencies.

But the parents who write tuition checks and students who sign loans are responsible, too. They make the decisions, Payne said, and it’s time they became smarter consumers.

“The problem is this focus on the bumper sticker,” Payne said. “That’s something we have to break with people. Cost does not create value.”

Parents need to talk to their children about their finances, Payne said, especially at the beginning of the college application process. This summer, she spoke with a father who said his daughter was admitted to a prestigious school, but the cost of attendance stretched well past the family’s financial limits.

“He feels she deserves this opportunity to go there,” Payne said. “Of course she deserves this, but does she have to go to that college for that sticker price? Families often don’t have a conversation about cost until after the child has been admitted to school and already has their heart set on a particular institution.”

Information about a choosing the right college education – and how to afford it – must start in high school, Payne said, where students should learn about loans, interest rates and how missed payments can affect a credit score. Some schools teach classes with similar information, but many students enter college unprepared. A bill was drafted in Concord this year to require school districts to teach financial literacy, but it was trashed in the Senate Education Committee.

“Students have to be more agile in how they look at institutions,” said Tom Horgan, president and CEO of the New Hampshire College and Universities Council. “It’s about making wise consumer choices.”

Affordability is the key word, said James Page, chancellor of the University of Maine System of public universities. Page and the system trustees voted to freeze tuition this fall for the first time in 25 years. In-state tuition in the New Hampshire system has gone up every year since 1989.

“Students have an enormous range of options now in getting an education, but it has to be affordable or it’s all moot,” he said.

For some families, that could mean a low-cost private college, but for others it might mean living at home and commuting part-time to the local community college.

“Many roads lead to Rome,” Payne said. “You have to do what’s in your long-term best interests and think about how you get that degree. We need to spend more time than perhaps we did 20 years ago looking at what some of those options are.”

The term “safety school” used to apply for admissions – it was a school where students could safely assume they would be offered admission. Now, students have to be looking for a “financial safety school,” Payne said.

“It’s the school where – when the time comes, for whatever reason, and the financial aid isn’t there – you can still afford to go,” she said. “It just isn’t necessary to spend the price tag that some of these campuses are charging.”

Students also need to be proactive about the opportunities provided by college, Payne said. They should be aware of online courses that could save money, or take advantage of the school’s financial aid process to find scholarships and grants. Students have to pursue internships, work during school and graduate with a plan, she said.

“The degree is meaningless without some dedication to pursue a particular profession,” Payne said. “It’s not magic – just add water and I’m a professional. You have to be active.”

A new report issued this week by the group Young Invincibles, a national organization representing the interests of 18- to 34-year-olds, said growing college debt can exclude young borrowers who are paying off loans from qualifying for home purchases.

Specifically, the report says:

• The average single student debtor is likely ineligible for the typical home mortgage due to their debt-to-income ratio.
• Including a typical mortgage and other consumer debt, the average single student debtor has a debt-to-income ratio of 0.49, meaning they would pay about half their monthly income toward student loans and mortgage payments and would not qualify for an FHA loan or many private mortgages.
• For couples looking to buy a house, it is more difficult to qualify for a home mortgage when even one of the buyers has student debt, and even harder if both buyers have student debt.

From Payne’s perspective, questioning the cost of college and being aware of its potentially negative side effects should become the new normal, but that doesn’t mean staying away from college and forgoing a degree. It’s in the best interest of parents to be more open with their children about what they can afford, Payne said, and it’s best for students to find the best financial fit for their future.

“We know there’s value in it,” Payne said. “There are all sorts of issues positively impacted by a college degree. No matter what the career, making the choice to pursue school or not is really not your choice anymore. To remain active in the workforce will require education beyond high school.

“But it’s not anyone’s dream to have $80,000 in debt.”