Colleges with Largest Endowments Leave Low-Income Students with Most Debt

Many of the nation’s wealthiest private colleges and universities leave their poorest students with heavy debt loads, a ProPublica analysis of new data from the U.S. Department of Education reveals.

This new data, drawn from figures published by the Obama administration on its new higher education comparison website College Scorecard, showed that more than a quarter of the nation’s 60 wealthiest universities leave their low-income students with an average of more than $20,000 in federal student loan debt.

For example, data from New York University (NYU) — one of the country’s wealthiest schools, with a $3.5 billion endowment — show that its Pell Grant recipients (students from families making less than $30,000 a year) owe an average of $23,250 in federal loans after graduation.

However, low-income students at some private colleges assume even more debt than NYU graduates. For instance, at the University of Southern California, which has a $4.6 billion endowment, the average debt load for these students is $23,375; at Boston University, with a $1.5 billion endowment, this number is $27,000; and at Wake Forest University, which has an endowment of $1.1 billion, low-income students assume $29,150 in debt.

These figures can have a negative effect on low-income students’ retention, as well as career outcomes and financial stability for years to come. Studies show that even a small amount of debt can increase a student’s chances of dropping out, particularly for minority and low-income students.

In addition, federal student loans — which usually cap at $27,000 over four years — don’t always cover the full cost of a higher education, and many students are forced to secure private loans or work jobs to pay for their degree.

“Student debt is not the same to every borrower,” Mark Huelsman, a senior analyst at public policy nonprofit Demos, said in a statement. “It can look a lot different to a first-generation student from a very modest economic background than to someone going to graduate school getting a law degree.”

In fact, undergraduate students tend to take a fraction of the loans of graduate students but default at much higher rates.

ProPublica’s analysis also revealed that students at nonprofit universities fare far better than those at for-profit schools and community colleges when it comes to debt. A recent study shows that students at public and nonprofit schools typically have lower default rates and higher earnings.

Of the nearly 2,000 nonprofit institutions analyzed, there are a handful of wealthy private colleges that do well serving the needs of low-income students. Vassar College, for example, with an endowment of $1 billion, charges students from the lowest income bracket a quarter of what NYU does, and they graduate with less than half the debt.

Because of changes made by Vassar President Catharine Bond Hill over the last decade, the college has become one of the most affordable schools in the country for low-income students. Today, more than 20 percent of Vassar’s students receive Pell Grants — a figure that’s doubled in the last 10 years ago.

Hill says that wealthy schools should be doing more to recruit these students and provide them aid.

“We know there are talented students out there, and recent work has shown there are ways to get them into our pools,” Hill told ProPublica. “Schools that have the resources should be giving out more in need-based grant aid.”