It’s graduation season, and we would like to extend a big congratulations to all the college graduates earning their diplomas this month! A college degree – whether an associate’s, bachelor’s or advanced degree – is a solid investment for future lifetime earnings. But that lifetime investment is getting harder for many students to obtain. Nationwide, we hear about more students financing their college education through loans and being saddled with debt when they enter the workforce. But what does this problem of student debt look like in Montana?
Compared to colleges and universities in neighboring states, Montana’s tuition levels have stayed relatively low. The average tuition and fees for an in-state freshman at UM or MSU is $6,399, over $1,500 less than the average for schools in the rest of the region. While the tuition and fees paid by Montana students have increased by 55% in the past decade, that is a lot less than the 110% in other states.
However, Montana students have higher debt loads than the national average. In 2012, almost two-thirds of Montana students took out loans, with an average total debt of $26,440 for a baccalaureate degree. But here is the key figure you need to pay attention to – although tuition at UM and MSU has increased by 11.5% since 2008, debt load for Montana students has increased by a much larger amount - 25%. Debt is a growing problem for Montana students.
So why has college debt increased at a greater pace than tuition?
Part of the reason is that Montana has failed to keep up in providing need-based aid to lower-income students.
Additionally, a recent report by the Brookings Institute notes that while a portion of rising student debt can be attributed to increased college costs, that doesn't entirely explain the increase. There are other reasons students are incurring more debt. Not surprisingly, the economic downturn has played a large role. Additionally, lower wages for workers have necessitated more families finance college costs through loans.
What does higher college debt mean for Montana students?
There is no question that a college education still produces dividends for the future. But the trend of taking out more debt to attend college can impact career choice and financial decisions later in life. Students with higher debt are less inclined to take jobs in government and public service jobs. Brookings also notes that, recently, students with high debt burdens tend to have lower credit scores, making it more difficult to buy a home. The report shows that homeownership rates of 30 years olds with student debt has fallen compared with students graduation without debt. Students with college debt may also delay saving for retirement.
This is a problem that affects all of us. The debt burden of Montana students negatively impacts economic growth in our state, and the issue is gaining state-wide attention.
The Montana Board of Regents, the governing body for Montana’s university system, will be discussing this very issue next week at its meeting in Havre. We commend the Board of Regents for continuing the discussion on this issue and hope other policymakers will consider ways to make college education more affordable for low-income families and lessen the debt burden of attendance.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.