Christian Student Loans

Don’t blame Baylor; reform student loan programs


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Baylor University was beaten by public relations last week when The Wall Street Journal announced the results of its analysis of federal student loan programs. Baylor was the worst in the country for Federal Parent Plus loan repayment rates among wealthy private schools (schools with over $ 1 billion).

Parent Plus is a program that allows parents of students to borrow money for their studies. Unlike student loan programs, there is no cap on the amount parents can borrow. The Newspaper revealed several families so indebted that they have no hope of repaying them. One, an educator from Texas, owes the federal government $ 139,000 for loans to send her two children to college, one of them to Baylor.

Baylor’s PR problem is linked to allegations that he may have been too keen on encouraging Parent Plus loans, especially for low-income families who would have difficulty repaying them.

“We were admitting students who really couldn’t afford Baylor,” said university president Linda Livingstone.

Baylor’s Parent Plus families are disproportionately in low-income groups, compared to other schools with large endowments. “Of the Baylor families who took out Plus loans, 47% had children receiving federal grants reserved for low-income students, according to the data, compared to an average of 28% among wealthy schools,” the Newspaper wrote.

It would be easy to blame Baylor for admitting low-income students they knew would be in debt. But a college education is a powerful tool in helping people escape generational poverty. So to blame Baylor for opening its doors is to blame it for a necessary approach to free itself from systemic poverty.

A second criticism could be that Baylor’s ambition hampered his mission. Baylor’s tuition fees have risen sharply in recent years, as has its profile and enrollment.

According to Newspaper, tuition fees are currently around $ 50,000, not including board and lodging. This is about 2.6 times more than 20 years ago, adjusted for inflation. In 2002, Baylor launched a 10-year improvement plan to become an elite school. This program has been successful. Baylor ranks 75th in the American News and World Report ranking, up from 125th position 30 years ago. This fall, the school enrolled its largest freshman class, nearly 4,300 students. And the school has an endowment of $ 1.8 billion. Baylor has added facilities, beautified its campus, invested in athletics and increased its stature among universities in Texas.

Had he been content with his status as a regional Baptist university, Baylor might not have invested so much in improving its offerings, and perhaps it would not have relied heavily on high tuition fees. that weighed heavily on poor families. But again, it’s hard for us to fault the leaders of a large Texan institution for engaging in strategic self-improvement.

Baylor is not alone here. According to a spreadsheet shared with us by the US Department of Education, four other Texas universities offered more Parent Plus loans totaling larger amounts than Baylor’s in the 2019-20 school year, the latest data available. These were the University of North Texas, the University of Texas at Austin, Texas A&M University, and Texas State University. Reimbursement rates and other conditions were not available for these institutions. The Newspaper Texas Christian University also sounded out for offering less proportional financial aid than most universities. Parents of recent TCU graduates who used the Plus Loans took an average of $ 57,000, one of the highest rates in the country.

No one wants to see people go into debt, but there is another entity involved here that needs to do more to ease the burden: the one these families are really in debt to – the federal government. Parent Plus borrowers pay higher than market rates – currently 6.28%. This interest begins to accrue as soon as the loan is taken out, although families may not be required to start repaying it until their student finishes school. And these loans come with a fee structure that comes with additional charges. The origination fees are deducted each semester at 4.228%.

An example might be helpful. Imagine a bright-eyed Baylor student looking to be the first in her family to earn a bachelor’s degree. She manages to cover two-thirds of tuition fees with savings, grants and scholarships. Her parents take out a Parent Plus loan to cover the rest. At current Baylor rates, that’s $ 16,500 per year. For the sake of simplicity, we will not include essential expenses such as books, travel, room, and meals in this example. Just tuition fees.

If she graduates in five years, our student’s parents will have borrowed $ 82,500 in principal only. College is expensive. But they will also have to pay an origination fee totaling $ 3,488.10.

Plus, as our student worries about having to prepare for her exams and making lifelong friendships, her family’s debt load will continue to mount. By the time she graduates, interest on the loans for her first semester will have reached $ 2,936.95. The interest on his second semester loan will be $ 2,601.40. And so on, for a total of $ 15,416.49.

Add all that up and our example gives a total debt of $ 101,404.59 awaiting our student’s parents when she graduates. Interest and fees represent $ 18,904.59 of this amount. Thus, nearly 20% of this debt consists of interest and fees.

This is where policy changes could help students as well as their alma maters. Lower the rates of these loans to competitive levels. Reduce assembly costs. And slow down the compound interest rate as long as the borrower’s child is a full-time student.

Federal authorities are supposed to be the ones offering favorable terms or even below market rates, not high fees accrued above market interest rates. Rather than incremental reforms such as debt cancellation or a free community college for all, the Biden administration should consider reforming these and other student loan programs. It is a common sense way to promote education, one that could translate into greater accessibility, leaner bureaucracy, and better outcomes for low-income students and their parents.

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