April is decision month. And as college-bound seniors weigh admissions and financial-aid offers, the families of about 1,800 students admitted to New York University have gotten an unusual call.
For the first time, the university is systematically contacting families with limited experience navigating the financial-aid process to talk about the debt they could incur if they send their son or daughter there. The conversations are not meant to discourage students from taking out loans, but they do hint at what college leaders believe: NYU is not the right financial fit for everyone who gets in.
The bottom-line message: Think this through. Carefully.
NYU is one of the most expensive colleges in the country, with an annual cost of $54,000, but it provides less institutional aid than many of its peers do. Because NYU has a relatively small endowment per student, it can’t tap into endowment income to the extent wealthier colleges can to pay for scholarships and the most generous aid.
The university has a $175-million budget for financial aid next year, but that has to be stretched among 19,000 undergraduates, more than two-thirds of whom typically apply for federal aid. As a result, NYU cannot cover the full financial need of its students.
To make up the difference, many take out loans. About 58 percent of NYU students graduated with debt in 2007, carrying an average of $33,637 in loans. The national average that year was around $21,000, according to the most recent data from the Project on Student Debt, a nonprofit advocacy group.
To cover the high costs of tuition and living in New York, about 80 percent of NYU students also work. Twenty-five percent work two jobs, and 500 undergraduates work three, in addition to going to class full time.
That concerns John E. Sexton, the university’s president. He believes that students who have to work that much or whose families are overstretched financially aren’t able to take advantage of the experiences that an NYU education offers. For some students who would really struggle to cover their costs, he says, NYU might not be the right choice.
It’s a surprising comment to hear from a college leader, but Mr. Sexton says he wants to be upfront about the reality that NYU — with its higher debt average, Manhattan location, and lack of such traditional college trappings as a football team — isn’t for everyone. While he believes that an NYU degree is worth “every penny” of its $54,000-a-year cost, he does not want any family to feel pressured into making unwise financial decisions.
“We’re going to have a policy of more-aggressive counseling about the financial burden families may be undertaking,” he says.
Such a policy is unusual. Some institutions, including nearby Barnard College, talk with students who are on financial aid and have applied for private loans, to be sure they are using the maximum amount of federal loans first. More often, colleges send out financial-aid packages and then talk with families if they call.
NYU’s leaders hope their new policy will help families — and, in turn, improve student retention by reducing the number of those who drop out or transfer for financial reasons. Barbara F. Hall, associate provost for enrollment management, says her counselors emphasized to families that aid is unlikely to go up in subsequent years. Parents and students need to think past paying for the first year and consider the cost over the next four.
Families, she says, need to ask themselves: “Is this a wise investment, or is it possible they could be mortgaging their future?”
Reality Check
Last year Mr. Sexton floated the idea of telling students in their acceptance letters that NYU might not be the right place for some of them, because it cannot provide as much financial aid as other universities. He mentioned the idea while speaking at a fund-raising conference last summer in New York with Shirley M. Tilghman, president of Princeton University. Princeton, a much wealthier institution, with just one-fourth the number of NYU’s undergraduates, was the first university to replace loans with grants for all students.
Ms. Hall suggested that talking with families might be a better approach, since NYU often doesn’t have a family’s complete financial picture. Some students, she says, could have a wealthy relative or community members chipping in to help pay the bills.
She knows it’s tough for parents to say no to their kids’ choice of college, especially when those children have worked hard to get in. But for some students coming out of NYU, she says, “we have a terrible debt load.”
After the university sent out financial-aid packages on April 1, counselors spent three weeks making 1,822 calls to families who, they felt, needed more information about loans and other aid. Those calls reached about a quarter of the 7,300 accepted students who qualified for financial aid. (They answered almost 300 e-mail messages as well.) Ms. Hall says there were probably more families who could have benefited from the outreach program, but counselors only had so much time. Families who were chosen for calls tended to fit two criteria — the child was the first in the family to go to college, or there was a significant gap between what the family could afford and NYU offered.
The calls started out with a congratulation, then a question about whether the parents understood what the aid package contained. Counselors talked about the difference between grants and loans, what a federal PLUS loan for parents is, and the difference between federal and private loans. (NYU does not recommend that students take out private loans, instead suggesting PLUS loans in its packages.) They don’t apologize for including federal student loans in the package. The idea is to ensure that the parents and the student know what they would be taking on.
And if parents indicated that maybe NYU wasn’t the right choice for their children after all, Ms. Hall says counselors could provide talking points about how parents could discuss that with their children. One suggestion would be for students to start out at a less expensive college for two years, then transfer to NYU.
The counselors did not weigh in on how much debt is too much, and neither will Ms. Hall. There is a line, she says, between giving information and taking on a role of a financial planner.
Ms. Hall won’t say if other institutions have a responsibility to discuss debt levels with students, but she believes that it’s the right choice for NYU. “I’m into telling the truth,” she says.
At the same time, NYU wants to offer more aid and is seeking private donations to do so. Last fall the university started a $400-million, five-year fund-raising campaign aimed at providing more aid to Pell Grant-eligible students, its neediest. Until then, NYU’s counseling policy is a way it can make sure that families are informed about loans and aid limitations.
“At the end of the day, it’s the family’s decision,” says Mr. Sexton, the president. “We’re not going to say, You can’t come here.”
How Much Is Too Much?
There is no exact measure of how much student debt is too much. It depends largely on the kinds of jobs and salaries students will have after graduation — and if they graduate.
The federal government says no more than 15 percent of a person’s income should go toward paying off student debt. Sandy Baum, a senior analyst with the College Board, believes that is a good figure. Ms. Baum, who wrote the 2006 College Board report “How Much Debt Is Too Much?,” says a realistic rule of thumb is to avoid borrowing more than a student expects to make in a year after college.
The problem, she says, is that students and their parents are making that guess when the student is 18. Guessing what kind of job a student will have after graduation is hardly a certainty. Borrowing for a college education is a good investment, Ms. Baum says, but it’s an uncertain one. She supports making loan paybacks based on income levels, something the federal government will start doing with its loans this summer, but that private lenders don’t.
In the current economic downturn, Ms. Baum is concerned that families might avoid taking on debt altogether. “What worries me,” she says, “is how do you find the middle ground, encouraging borrowing responsibly but not excessively?”
When expensive colleges admit students who clearly cannot afford to go there, and for whom the colleges cannot provide enough aid, they are effectively admitting and then denying the students, says Mark Kantrowitz, publisher of FinAid, a Web site that provides financial-aid information. Colleges in that situation should make some hard choices about whether need-blind admissions are serving their students, he says.
“It does no good to have students attend a college they can’t afford,” Mr. Kantrowitz says. “A student who graduates with enormous amounts of debt will find that debt is going to affect their career choices and life-cycle decisions, such as when to get married, have children, and buy a house.”
On the other hand, he says, an argument can be made for not outright rejecting students based on their financial situations. NYU’s counseling program is a “reasonable middle ground” that other colleges should consider. “At the very least,” he says, “it dissuades people from thinking they can struggle through the first year, and the school will come through with more money” in following years, a belief he says many people hold.
Deciding to Go
Jessica Roy, a junior at NYU, will graduate with student loans of about $40,000, and her parents have also taken out loans to help pay for her education. She also works 30 or more hours a week to help pay the bills.
Last year she had a chance to ask Mr. Sexton about his views on student debt when she attended a roundtable discussion led by him and a university trustee. The president was talking about how NYU allows students to follow their passions. Ms. Roy, who wants to become a journalist, says she asked him about students like herself, who have to work and don’t have time to do unpaid internships or focus on their passions.
Mr. Sexton said he had talked with other students in the same situation. He told Ms. Roy that what he had said to them was, If it’s that financially difficult to attend NYU, do you think you belong here?
His response stung, Ms. Roy says. NYU had been her dream school since she was 14, and she had applied early decision. She was willing to take out the necessary loans to attend.
“I feel like I was too young to understand or care,” she says. “It was more, I really wanted to go there. ... It didn’t actually process.”
Ms. Roy doesn’t regret her decision to go to NYU, and she is not sure that a counseling call from a financial-aid officer would have made a difference. “I can’t picture myself at another school,” she says. “But I haven’t started paying off the loans yet. Who knows, in a year I may.”
NYU is also the first choice for Shelby L. Sampsel, a high-school senior from Toledo, Ohio. Going to college there has been her dream since she visited the city at age 8. But the debt she and her mother would have to take on may end up pushing her toward another college.
Ms. Sampsel’s father recently died, and her mother was laid off from a job in health-insurance sales. She received a financial-aid package from NYU that contains about $28,000 in scholarships and grants, along with $4,000 in work-study funds. But the rest of her costs would be covered by loans — $5,500 for her and a $17,000 PLUS loan for her mother. All told, she and her mother could be in $88,000 of debt when she graduates.
Ms. Sampsel is waiting to find out about Fordham University’s financial-aid package. But she thinks that NYU, which offers her a chance to customize her course of study, would be the best fit for her. Ms. Sampsel, who was accepted to NYU’s Gallatin School of Individualized Study, is considering a career in psychology. She wants to combine study in psychology, theater, and creative writing.
The cost “is a big portion of the decision where to attend,” she says. “I have to weigh how much debt I want to have versus how important going to that school is to me.”
Her mother, Kathy L. Sampsel, says she will leaving the decision to Shelby, who she says worked hard to get into NYU and several other selective colleges. Still, she says, they will sit down and crunch some numbers about debt levels and what kind of job Shelby expects to get. The family’s eldest child, a son, is a student at Ohio State University and will have about $15,000 of debt when he graduates. Shelby’s mother would like to see all of her three children stay in that range of debt when they graduate. “I think all colleges are overpriced,” she says, but she is willing to do what she can, including taking out PLUS loans, to help her daughter fulfill her dreams.
Can’t Reach Everyone
Despite their difficult financial situation, the Sampsels were not among the families that got calls from NYU, most likely because they had already sent a child to college. Nor did the family call NYU. Last week Shelby Sampsel sent the financial-aid office an e-mail message with questions about loan approval.
“We are never going to get to everybody,” says Ms. Hall, the associate provost. While her office made more than 1,800 calls, there were many more families, like the Sampsels, they could have reached out to if there had been more time. “By making these calls, have we disadvantaged some other students? I’m not sure,” she says.
Next year the financial-aid office may try to cast a wider net. While Ms. Hall expects to continue with the targeted calls, she is also considering Webcasts or Web chats, so that all prospective students and their families can ask questions before deciding whether or not to attend NYU.
After that, the decision about financial fit will still be in the family’s hands.
http://chronicle.com Section: Students Volume 55, Issue 34, Page A18
