Literature reviews

Article: Correcting course: How we can restore the ideals of public higher education in a market-driven era, by Lara Couturier and Jamie Scurry

(http://www.futuresproject.org/news-publications.html)

Maria Luna-Torres, Director, Educational Finance Initiatives, TG

Couturier and Scurry present an insightful and comprehensive account of the changes that are confronting higher education and how these changes are altering the way higher education operates. The authors state that institutions of higher education are dramatically more market-oriented today than in past years.

Competition in higher education
In the first section, Couturier and Scurry take a stand against higher education becoming competition-driven. They claim that institutions are luring the best, brightest, and most affluent students with state-of-the-art computer labs, luxurious dormitories, and new gymnasiums, at their campuses. In addition, they say that financial aid packages are being used as a competitive tool to attract students with the highest test scores and GPAs, rather than designing financial aid packages for qualified low-income students. Indeed, this is not a new observation, and it is one with which many higher education professionals would agree with. Moreover, Couturier and Scurry argue that state policies have come to favor an open market, which does not necessarily lead to increased access, better instruction, lower costs, or greater efficiency in higher education.

Addressing public policy needs
As a remedy, the authors urge state lawmakers and university administrators to cooperatively find a way to ensure that state control over the mission of public colleges and universities meets the state's economic, social, and demographic needs, while also granting greater operational autonomy for institutions. This, of course, is an idea that in theory would solve many of the inequalities and inefficiencies that exist in institutions of higher education today. However, Couturier's and Scurry's recommendations will likely take time to implement and will require a true collaboration between state officials and higher education administrators.

Recommendations
The authors propose that state lawmakers be held accountable for the following:

• Defining the public and private benefits of higher education;
• Creating accountability systems that recognize institutional diversity;
• Demanding performance in access, student learning, and attainment;
• Acknowledging that higher education is not a business; and,
• Providing the funding necessary to serve both private and public interests.

On the other hand, Couturier and Scurry urge colleges and universities to agree to:

1. Measure what is valued;
2. Take responsibility for teaching and learning;
3. Move beyond access to promoting attainment;
4. Address problems of efficiency and productivity;
5. Support elementary and secondary education;
6. Reduce conflicts of interest;
7. Provide constructive criticism of societal trends and values; and
8. Rebuild political involvement to sustain democracy.

Responsibility of the public
The article concludes with a message to the public about the important role it plays in the success of higher education systems. Community members are urged to request information about the performance of their institutions, encourage state legislators and board members to demand transparent and comparable data about institutional performance, use institutions as a local and regional resource, and to participate in conversations with higher education leaders and policy makers.

Conclusions
The issues of access, inefficiency, and the emerging market-driven competition in higher education are well defined by Couturier and Scurry. The authors do offer a number of feasible recommendations for addressing these issues. Correcting Course: How We Can Restore the Ideal of Public Higher Education in a Market-Driven Era is an article that should certainly be of interest not only to higher education professionals, but also state lawmakers, businesses, and the general public as they all play a role in the success of realigning the mission of higher education institutions with their original mission of providing access to all those seeking the opportunity to acquire a higher education.

About the author
Maria Luna-Torres is director for educational finance initiatives at TG. She serves as staff director providing operational leadership to TG's partnership with the Council for the Management of Educational Finance. Maria can be reached at (512) 219-4632 or maria.luna-torres@tgslc.org.

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Review Essay: What we know about student credit use and abuse and what we can do about it

Matt Short, Director, Institutional Enrollment Services, TG

Student debt is a justifiably hot topic on campuses and has been for several years. With the steep increase in tuition and fees at most campuses and a concomitant stagnation of levels of aid to pay for a college education, it's no surprise that debt is a concern. Debt, especially credit card debt that has to be paid while the student is in school, puts students at risk of being unable to continue their educations or to increase their number of stopouts and greatly slow their educations. For this reason, it is important for enrollment managers to know as much as possible about student debt and credit card use. Only armed with facts will we be able to help, teach, and cajole our students onto the right paths.

Of the six studies reviewed, three are based on self-reported studies of students at individual campuses. Two of the studies used data sources that did not rely on individual reports, but on account information. The final study under review was itself a review of some literature on students' debt including interviews with the authors of a several studies. All the studies cited provide some important insights into student credit card indebtedness.

Barron and Staten
In Barron and Staten's (2004) article, the authors examined a 12-month snapshot of more than 300,000 credit card accounts in three categories — accounts opened via a college-student marketing program, accounts opened by individuals under 25 in a standard marketing plan, and accounts opened by individuals over 25 not part of a college marketing plan.

Accounts belonging to individuals who received their credit cards as part of a college-student marketing plan were more likely to be delinquent and more likely to be charged off than others. They also found that those accounts had lower balances and less frequent use than other accounts. However, there were some artificial constraints.

One important constraint on the college-student marketing accounts was the lower limits (often $500 or less). The authors also found that account activity in accounts started as part of a college-student marketing program began to become more like other account types after two or more years. It does not really contradict other studies because it only examines account behavior and not the individuals who owned the accounts (e.g., they had no way to know if charge offs on one card were linked to any others because they had no way to link individuals in the study with more than one card). There are also good critiques of earlier credit card studies, especially the Nellie Mae studies.

Davies and Lea
The only study from outside the United States was the 1995 study (Davies, E. & Lea, S.E.G.) of student debts at the University of Exeter in the United Kingdom. In the study, which was less focused on credit cards than the others, they compared the debt levels of first-, second-, and third-year students. As in Mattson, et al. (2004) and Norvilitis, et al. (2003) the data was collected from a survey of the students.

The way the authors administered their survey gave them very nearly a 100 percent rate of return. Much of what they found mirrors what the U.S.-based researchers found. As students progressed, their debt loads increased. Students borrowed to support a middle-class lifestyle. The authors noted that most of the students came from middle class or higher backgrounds and were reluctant to give up those comforts. Also, students expected to be able to repay what they viewed as temporary debts.

Student attitudes toward debt changed over time as well. As a group, the investigators found students to have more positive attitude toward indebtedness than the general population. However, first-year students as a group had a slightly negative view of debt, but by the third year, the group had a strong pro-debt view. It is the authors' contention that the need to finance life and study with debt leads to the pro-debt attitude and not vice versa.

Mattson, Sahlohoff, Blackstone, Peden, and Nahm
The article examining credit card use among students at the University of Wisconsin — Eau Claire is based on a multi-year study by Nellie Mae that shows Midwestern students carry higher balances on credit cards (Mattson, L., Sahlohoff, K. Blackstone, J. Peden, B. Nahm, A.Y. 2004). The authors used an Internet survey of freshman and senior students and compared the findings.

Not surprisingly, seniors had more debt and more credit cards and acquired their cards in different ways. Important findings include the fact that students educated about credit card use and credit carried balances similar to students who had not been given such education. The study also found a correlation between students who got their cards from on-campus promotions and high credit card balances. Other factors that influenced students to use cards and not pay off their balances included the presence of other debts, income level, and the number of credit cards the student had.

Nellie Mae
Last, so far, in a series of reports on student credit card use, the 2002 study by Nellie Mae sought to avoid self-reported data. The credit card behavior analyzed is drawn solely from students who were applicants for private Nellie Mae education loans. The company analyzed the credit reports of a random sample of loan applicants from different areas of the U.S.

Important findings include the differences in student debt by U.S. region and the fact that most students now have their first credit experience via credit cards rather than student loans. Ten years prior to this report, most students had their first experience with debt via federal student loans. Other important finding includes students carrying higher median balances than in the past and having more cards. Most students have at least one credit card — 83 percent. Between matriculation and graduation, students triple the number and double the balances of their credit cards.

Norvilitis, Szablicki, and Wilson
In Norvilitis, J.M., Szablicki, P.B., & Wilson, S.D. (2003), the authors studied a sample of students at a single higher education institution, SUNY — Buffalo. Not surprisingly, many of the findings were again similar. Among others, they found higher debt-to-income ratios for students who received their first cards on campus, a very high percentage of students with cards — 75 percent — and a low level of knowledge about money and credit. Interestingly, they also found 24 percent of the students believed that on-campus credit card vendors had been screened by the university. This was untrue.

Other important findings included the fact that students used credit cards to support a middle-class lifestyle and overestimated their post-graduate earning and, thus, their ability to repay their debts. The authors also found that students who had anti-debt attitudes carried debt loads similar to students with more pro-debt attitudes.

Winerman
The final article is from the American Psychological Association's magazine Monitor on Psychology (2004). The issue focused on consumerism, and the review of some literature on student debts was just one part. The author, Winerman, also spoke with several authors of studies on debt and asked them to elaborate on their findings.

Among the findings in her article, poorer people are more likely to be in debt, as are younger people. Also, having a low income compared to others in the same social class is also positively correlated to being in debt. Obviously, these three findings describe the situation of many college students. Not surprisingly, attitude toward debts was positively correlated to being in debt in most studies. Winerman found the question of whether debtors changed attitudes or vice versa to also be an interesting question.

Conclusions
As a group, the studies present a notable body of work. The fact that the three campus-based studies (Davies & Lea, 1995; Mattson, et al., 2004; Norvilitis, 2003) tend to confirm one another's findings, especially the two American studies, suggests that we can have some confidence in them. It is interesting to note that none of them were able to find a connection between locus of control and the level of a student's debt, though all three hypothesized that one would exist.

The Nellie Mae (2002) study and Barron and Staten's (2004) study attempted to avoid the problems sometimes associated with surveying individuals. Those problems often include the rate of return and inaccuracies with self-reported data. Both studies provide useful information. The fact that the Nellie Mae (2002) study was able to report trends based on two prior studies, and the fact that Nellie Mae reported national data was very helpful. Both, the Barron and Staten (2004) and the Mattson, et al. (2004) studies refer to it. The Nellie Mae study is especially helpful for background information. The limitation of both of these studies is their inability to explain student motivations. This limitation is not a flaw but an inevitable consequence of their designs.

One cause for concern with the Nellie Mae study (2002) is the fact that all the data was collected from students who applied for Nellie Mae education loans. Because of the nature of private education loans, it is possible that those students applying for them would have higher than average indebtedness and willingness to incur debt compared to the general population of students. In most cases, students borrowing these types of loans have already used the maximum amount of federally subsidized loans. Furthermore, despite huge growth in private education loan volume, borrowing money from private sources is still atypical. Barron and Staten (2004) commented on this aspect as well.

The sixth study, like this article, was largely a review of literature. Winerman (2004) also spoke with the authors of several of the studies and reported their comments. A primary point of interest in this study is that it gave voice to the motivations and intuitions of some of the authors. It also provided a broad look at student debt and credit cards.

Based on these six studies, what can we now say seems reasonable to assume about the relationship between students and debt, especially credit cards? It seems likely that students are often borrowing and using credit cards to support a lifestyle based on the findings reported in four of the articles (Davis and Lea, 1995; Mattson, et al., 2004; Norvilitis, et al., 2003; and Winerman, 2004).

Though student credit card accounts opened through college-student marketing programs were reported to have low balances by design (Barron & Staten, 2004), several studies found that students who received their cards in that way were more likely to be in more debt (Mattson, et al., 2004; Norvilitis, et al., 2003). The appropriate conclusion seems to be that the number of cards students possess is critical to the debt load they can and will incur. Also, whatever the unknown causal factor is, having credit card vendors on campus has a negative impact on student debt loads.

Barron and Staten (2004) observed that college-student marketed accounts were more likely to be charged off or delinquent than others; however, after two years, those risks seemed to merge with accounts generated in the mainstream. Part of the explanation may lie in the findings of Norvilitis, et al. (2003) that many students lacked an understanding of basic finances and even believed that colleges screened credit card vendors operating on their campuses. Norvilitis and her co-authors (2003) also found that students tended to overestimate their future earnings, and, therefore, their abilities to handle high amounts of debt. The conclusion I draw from these facts is that financial literacy education is important for today's students. However, it is apparent that basic financial literacy training, while necessary, is not sufficient. Norvilitis, et al. (2003), found that students who were opposed to taking on debt were indebted at levels similar to students with pro-debt attitudes, and Mattson, et al. (2004) found that students who were educated about how credit and debt worked were indebted at the same level as their less-informed peers. This, combined with the observation that incurring debt often leads to a change in attitude towards indebtedness, (Davies & Lea, 1995). It seems likely that education about lifestyle choices and other factors related to the motivation to spend money and incur debt is also required.

It seems intuitive enough, but it is important to start financial literacy education as early as possible. Freshmen attitudes toward debt are more negative (Davies & Lea, 1995) and they have fewer credit cards and lower balances (Mattson, et al., 2004; Nellie Mae, 2002; Norvilitis, et al., 2003). Also, those students may not have been targeted yet by marketers and would be better-prepared if they were educated sooner rather than later. Additionally, Barron and Staten (2004) suggest that over a period of about two years, students who received their cards through college marketing programs caught up to individuals who received their cards through mainstream marketing. I think this suggests that freshmen are more likely to be helped by financial literacy training than upper classmen. Educate the freshmen, or they will be forced to learn from experience that may include financial hardships and be a threat to retention.

There has been a significant amount of work done in the last ten years to understand student indebtedness. My contention is that good research pays off when it is put to good use. I think these studies suggest some specific things we can do to engender good credit and spending practices by our students on our campuses. Doing so can aid retention, graduation, and alumni satisfaction. Specifically, we need to educate our students about basic finances and lifestyle choices and how those will impact their futures. We need to do this as early as possible to get students savvy to marketers and to give them the knowledge to deal with the debts they do incur. We should specifically encourage them to limit the number of credit cards they have and teach them to use them responsibly. Finally, we need to ensure that students have a realistic idea of how much they are going to earn when they leave the campus for good. Unfortunately, most of them won't start out making that six-figure salary they were anticipating. It also sounds like it would be a good idea to keep credit card vendors off of campus or limit their presence as much as possible.

Studies reviewed in this article

Barron, J.M. & Staten, M.E. (2004). Usage of credit cards received through college student-marketing programs. Journal of Student Financial Aid, 34, (3) 7-26.

Davies, E. & Lea, S.E.G. (1995). Student attitudes to student debt. Journal of Economic Psychology, 16, 663-679.

Mattson, L., Sahlohoff, K. Blackstone, J. Peden, B. Nahm, A.Y. (2004). Variables influencing credit card balances at a Midwestern university." Journal of Student Financial Aid, 34, (2) 7-18.

Nellie Mae Corporation. (2002). Undergraduate Students and Credit Cards: An Analysis of Rates and Trends. Braintree, MA.

Norvilitis, J.M., Szablicki, P.B., & Wilson, S.D. (2003). Factors influencing levels of credit-card debt in college students. Journal of Applied Social Psychology, 33 (5), 935-947.

Winerman, L. (2004). Maxed out: Why do some succumb and others steer clear? Monitor on Psychology, 35 (6), 62-64.

About the author
Matt Short serves as TG's director of institutional enrollment services, where he directs TG's SEM initiatives and partnerships. He can be reached at (512) 219-4662 or matt.short@tgslc.org.

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