President McGuire Testifies Before Senate Committee on the Impact of the Credit Crunch on Student Loans
Trinity President Patricia McGuire testified before the Senate Banking Committee on April 15, 2008, regarding the impact of the credit crunch on the student loan market and college students. The Committee hearing was convened to address the growing concern regarding the impact of the ongoing credit market crisis on the cost and availability of federally-guaranteed and private student loans. Her written testimony is below. Contact Ann Pauley to arrange media interviews: 202/884-9725, pauleya@trinitydc.edu
Testimony of President Patricia A. McGuire
Trinity Washington University
Before the Senate Banking Committee
April 15, 2008
Regarding the Impact of the Credit Crunch
On the Student Loan Market and College Students
Trinity is one of the remarkable stories of transformation in American higher education. One of the nation’s historic Catholic women’s colleges, now a comprehensive urban university, Trinity today educates a majority of African American, Latina and other students from economically disadvantaged backgrounds in the District of Columbia and nearby Prince Georges County. After years of struggling with enrollment, our historic undergraduate women’s college is now thriving with a new generation of young women from our region who desire an excellent academic education, while working women and men from D.C. and surrounding jurisdictions find Trinity’s professional programs to be sources of great success. Scores of local employers seek out our students even when they are still in school, and our graduates gain entrance to some of the finest law, medical and graduate schools.
All of this is now at risk. The credit crisis and its potential impact on student loans could have grave consequences for Trinity and the students we serve. I am testifying here today because Trinity is emblematic of the small, private institutions of this nation — of which there are hundreds — who, while thinly capitalized, are providing vitally important educational leadership to at-risk students, which is a great service to our region and nation. Trinity’s $10 million endowment marks us as one of those colleges founded by Catholic religious women whose devotion to mission led them to spend more time teaching their students than amassing wealth. It is one of the great ironies of contemporary higher education that small, marginally-resourced private institutions like Trinity now serve proportionately more low income students than many public universities, particularly the flagship state universities. Trinity’s median family income is about $30,000, compared to a median family income near $100,000 at Maryland or UVA.
Our students are at grave risk. To supplement the very large tuition support that Trinity provides in unfunded institutional grants (averaging 40% of our tuition price) our students also depend heavily on federal student loans and some private loans to finance their education at Trinity and to support their living expenses while in college. Unlike wealthier families, these students have no fallback position. If their student loans disappear, their college may also be at grave risk. We, too, have no fallback position. Yale, Harvard, Princeton and other immensely wealthy institutions can relieve middle class families of any worries by removing loans entirely from their financial aid mix, using the earnings of their massive endowments to subsidize students whose family incomes may be as high as $150,000 per year. My students — whose families would be delighted to earn $50,000 per year — cannot have the same financial privileges that Harvard and Yale can extend to their students. Where will my students go to school if their loans disappear? What will Trinity do if our students cannot afford to pay their modest balances on our tuition bills? The credit crisis poses enormous risk for students and colleges both.
Trinity: History and Transformation
Trinity has played a significant role in American history. Founded in 1897 by the Sisters of Notre Dame de Namur to educate women who were barred from admission to the male universities in Washington in those days, Trinity College grew to become the alma mater of many notable women of achievement in the public sector, including numerous judges at the federal and local levels, White House staff in several administrations, a governor (Kansas Governor Kathleen Sebelius, Class of 1970), former Congresswoman from Connecticut Barbara Bailey Kennelly, Class of 1958, and the first woman Speaker of the House Nancy Pelosi, Class of 1962.
(May I also note Speaker Pelosi’s distinguished classmate Martha Dodd Buonanno, sister of Senator Dodd, whose Trinity roots were clearly established well before he met Martha, since his dear mother Grace Murphy Dodd was a member of our Class of 1929!)
Trinity in 2008 is a remarkably different institution from the historic Catholic women’s college of the previous century — larger, more diverse academically and demographically, and serving a majority of students of color from economically challenged backgrounds. Trinity in 2008 enrolls more District of Columbia residents than any other private university in the nation; nearly half (about 785) of our 1650 degree students are D.C. residents; another one-third hail from Prince Georges County, sharing many of the same economic and demographic characteristics of our D.C. residents. Virtually all of our D.C. residents come from the eastern half of the city, fully a third from east of the Anacostia River in Wards 7 and 8. We are the only university offering a degree program east of the river at THE ARC in southeast Washington.
Trinity helps students to achieve levels of academic success that many previously thought unattainable. Trinity’s studies show that during a five year period since 2001, 65% of our D.C. students are either still enrolled or have graduated, a remarkable rate of success in a city where studies show that only 9% of today’s 9th graders will finish college. (1) A recent report by the D.C. State Education Office, funded by the Gates Foundation, hailed Trinity’s success with D.C. students: “…the District should more proactively encourage increased D.C. student enrollment in colleges with a track record of success in serving low-income and minority students, including higher graduation rates…such as Trinity…” (2) Trinity’s overall six-year completion rate is about 55%, which is significantly higher for the population we serve than the national average. (3)
Today’s Trinity graduates follow in the footsteps of our prior generations when it comes to post-baccalaureate achievement: among recent graduates we have a Jack Kent Cooke Scholar now studying law at Georgetown; a Charles Rangel Fellow preparing to enter the foreign service; and numerous candidates for degrees in medicine, law, policy studies, education and other fields in universities as distinguished as Columbia, Penn, Cornell, the University of Virginia, Georgetown Law and many other great graduate schools. Our recent graduates have also gone on to work in excellent professional positions with many federal agencies and private firms in the Washington region. Because of our strong tradition of internships, nearly 100% of our students are employed by the time of graduation. A recent report on the higher ed website, Inside Higher Ed, highlighted Trinity’s new general education curriculum, illustrating the tremendous faculty commitment that ensures success for our students. This article is attached to this testimony.
Trinity accomplishes all of this without a great deal of fanfare, and without extravagant resources. In testimony I gave in December 2006 before the Senate Finance Committee (“Report Card on Tax Exemptions and Incentives for Higher Education: Pass, Fail or Need Improvement?”) I elaborated on the many ways in which Trinity and institutions like us provide great value for college students with only modest resources and careful attention to student economic concerns.
Demographics and Economics
Nearly 90% of Trinity’s students today are Black, Hispanic, Asian or international in their immediate family identities, and more than 95% are low income students who receive substantial unfunded tuition discounts in order to attend Trinity — 40% is our average full-time tuition discount. “Unfunded” means that we do not have endowment subsidizing these “grants”– this is lost revenue, amounting to more than $4.5 million annually on our $25 million budget. Trinity’s endowment is just about $10 million, which means that we do not have the means to support our students if the federally guaranteed student loan programs or the private loan programs are jeopardized. 62% of Trinity students receive Pell Grants, another indicator of the critical economic challenges our students face.
Tuition and Financial Aid
Trinity’s full-time tuition is $18,250 in 2007-2008 (in 2008-2009, tuition will go up 3% to $18,800), but I don’t know of any students who actually pay that amount. Trinity makes every effort to keep our annual tuition increases very modest, just about 3%, since we know our students have large financial burdens. Trinity’s tuition today is just 77% of the median national tuition for private four-year colleges ($23,700 in 2007-2008). The chart below showing the difference between Trinity’s price increases and national private college tuitions illustrates the fact that Trinity’s modest tuition pricing policy has provided a sizeable amount of additional price support to students that is in addition to the formal 40% average discount that nearly 100% of our full-time students receive.
Trinity provides similarly price-conscious tuition rates for our part-time and adult students in professional and graduate programs. We estimate the total cost of attendance at Trinity this year to be $26,900 (in 2008-2009 we estimate the total cost will be $27,700) with housing and food costs added, either on-campus or off-campus. For full-time undergraduates, after the Trinity discount, the Pell Grants, the D.C. Tuition Assistance Grants and other financial aid, the typical full-time Trinity student pays about $2,000 or less out-of-pocket for remaining tuition balance and related non-housing expenses like books or transportation. That’s still a great struggle for many of our students. Book prices alone can break the back of even middle class students, to say nothing of students hailing from Wards 7 and 8 in D.C. — a $160 economics or biology textbook has sadly become the norm, and even though we work with faculty to find alternatives, books remain the bedrock of higher learning and students need to acquire their own academic materials over time. In the same way, having a personal computer today is essential for academic work, but many of our students cannot imagine spending $500 or more to purchase their own computer; we provide as much space as we can afford to offer in computer labs.
In order to afford these essentials, most of our students are working at least 30-40 hours a week, even as full-time 18 year-old freshmen, in order to achieve their dream of a college degree at Trinity. The majority of these students have virtually no “expected family contribution” when financial aid calculations are done, and they are largely independent students even though they are of traditional college age. Many of these students also contribute to the support of their families, including, in some cases, their own children. But their desire for a college education is so strong that they are willing to work hard and make many sacrifices in order to stay in school.
Trinity students face many economic challenges. This data comes from the Freshman Survey of the Cooperative Institutional Research Program (CIRP) administered every year to first year students since 1968. Trinity’s comparison cohort is women at 4-year Catholic colleges. For Trinity freshmen in the Fall of 2007, 50% reported estimated family incomes of less than $30,000. Compare that to the cohort group, where 50% reported estimated family income of less than $75,000.
The Vital Importance of Federal Loans
The federally guaranteed loan program is essential to ensure that Trinity students, and students like them, can stay in school, focus on their academics, and earn their degrees. At a time when there’s so much national rhetoric about the cost of higher education and the squeeze on low income students, in particular, the credit crisis and the threats to the loan programs could be catastrophic not only for individual students but for the future economic productivity of our nation.
Our students at Trinity clearly need the federal loan program to help them cover the remaining tuition costs that Trinity and other grants cannot subsidize, as well as the additional costs of attendance beyond tuition, including support for housing and food, as well as books and transportation. Our experience shows that we refund about 35% of the total loan volume back to our students, and these refunds make it possible for students to pay for their books and living expenses while enrolled in school.
To put those numbers in perspective: Trinity’s operating budget in Fiscal 09 will be just about $25 million, and we expect our tuition revenues to be fairly similar to this year — about $19 million in net tuition after we subtract the discount. So, Trinity’s budget is about 76% dependent upon tuition revenues, 80% dependent on student tuition and fees when we add in room and board fees. Because student loans are the largest form of financial support our students receive, any weakness in their ability to secure loans will also impact Trinity’s bottom line quite severely. Our $10 million endowment could not possibly backstop any erosion in student loans, particularly in light of our already-substantial discounts.
For the nearly 1300 students receiving loans reflected on the above chart, any reduction in their ability to borrow could be catastrophic for their academic careers and personal life goals. Graduate students, who can borrow very substantial sums, are not eligible for grants, so they need the loans to support the full tuition price. The 372 first year students could not possibly replace $5,555 in loans with other aid sources; Trinity already provides those same students an average Trinity grant of $6,550, and 78% of that student group also receives Pell Grants averaging $3,402.
I should also point out that even with such a large loan volume, Trinity’s default rate is just about 3.2%, which is a remarkable achievement that indicates how seriously our students take their obligations to repay their student loans.
While the vast majority of Trinity students participate in the federally guaranteed student loan program (FFELP), a small number of Trinity students are also dependent upon private alternative loans to help finance a portion of their higher education. We currently have 81 students, including 78 undergraduates, who receive nearly $800,000 in private loans. The illustration below shows the average private loan for these students by class year. This group is the most seriously at-risk at present for devastation of their college plans by the collapse of the private loan market.
Conclusion
Higher education is the engine that drives the Knowledge Economy. For this nation, promoting access to higher education has been a firm national policy since the GI Bill in 1944. Successor legislation expanded the benefits of that landmark law to millions of students who might not have gone to college without the benefit of federal aid.
I know full well the importance of financial aid, particularly the federal student loan programs. I could not have attended Trinity College without a generous scholarship from a benefactor I never met, and I would not have been able to afford my law degree at Georgetown without federal student loans. Looking back, I am still amazed at the ways in which that generous benefactor and those progressive loan programs shaped my professional and personal life.
When I see my students racing to class each day at Trinity, struggling with their Shakespeare papers and pondering their history textbooks, learning to conduct public opinion polls or chemistry experiments, I know that great careers and fulfilled lives are on their horizons because of the opportunities we have been able to extend to these students at Trinity. Particularly for the young women from the District of Columbia for whom Trinity offers so many advantages that were not part of their previous educational experience, the pride, self-confidence and academic skills that they acquire at Trinity are truly transformative. When I recently listened to a student explain with excitement how she finally understood algebra, when I saw her joy as she related her parents’ disbelief that she is now earning at least B’s on her math exams, I know that we must find every means to sustain our mission.
Federal student loans are essential to fulfilling the promise of higher education for the students we serve at Trinity, who are not so very different from millions of American college students. The return they will make to this nation is incalculable — if they are able to persist in school and finish their degrees. Any interruption of student loans will be a great loss not only for our students and our institutions, but also for our nation.
Footnotes:
1. For more on Trinity’s success with D.C. students go to: www.trinitydc.edu/dc/
2. “Doubling the Numbers: a Call for Action for the District of Columbia,” D.C. State Education Office, October 2006. Available online (click here).
3. Many of the students who do not complete at Trinity actually complete their degrees at other institutions, but the current national method for calculating graduation rates does not include students who transfer out and complete elsewhere. Moreover, some students who stop out actually do come back to complete degrees later on, in our adult studies programs, but students who take more than six years to complete are also left out of the current methodology for calculating completion. In particular, many women who start degrees when they are teenagers stop out to have families or care for sick relatives or attend to the demands of work; they return to college in their 30’s and 40’s to finish those long-desired degrees. In other forums, I have advocated for a change in the view of degree completion to capture these persistent undergraduates whose circuitous route to degrees is heroic and deserves recognition in our national data system. Note as well that, nationally, nearly 75% of all undergraduate students are now “non-traditional” by age or work circumstances or de facto independence from parents. Fewer than 25% of all undergraduates are “traditional” in terms of being on-campus residents with two parents who are paying the college bills. Lenders who threaten to use “dropout rates” or other statistically flawed methods need to take a careful look at the real data and trends behind the published information.
PDF of President McGuire’s Testimony
Interviews with President McGuire and News Coverage of Senate Hearings:
View Senate Hearing, April 15, 2008
President McGuire’s Interview on Bloomberg Television
Interview with President McGuire on C-SPAN’s Washington Journal on April 16, 2008 (Real Video)
Coverage of Senate Hearing: Hartford Courant, President McGuire Quoted
Coverage of Senate Hearing: Inside Higher Ed, President McGuire Quoted
Coverage of Senate Hearing on PBS’ Nightly Business News, President McGuire Quoted: Read Transcript
Student Financial Aid Association Coverage of Hearing
Inside Higher Ed Article on Trinity’s New Curriculum