Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
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Glenn Hegar
Texas Comptroller of Public Accounts
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A Review of the Texas Economy


Student Loan Debt in Texas Financial Education, Manageable Debt Keys to Future Economy

by Jackie Benton Published March 2020

As this issue went to press, a wave of coronavirus closings and dislocations began sweeping our state and the nation. This will have obvious impacts on Texas government and the state’s economy, but it’s too early to say definitively what the effects will be. The Comptroller’s office will be monitoring the situation closely.

Graduation is the culmination of a college career. But it’s also when the clock starts ticking for many of these newly minted graduates — to begin paying back their student loans. And while graduation guarantees a degree, it doesn’t guarantee a paycheck large enough to pay back that debt.

The Federal Reserve Bank of New York (FRBNY)’s Quarterly Report on Household Debt and Credit, released in February 2020, put the nation’s outstanding student loan debt at an astonishing $1.51 trillion as of Dec. 31, 2019, more than five times the amount reported in 2003. According to FRBNY, this rise can be attributed both to an increasing number of borrowers (about 43 million took out student loans in 2019, versus 19 million in 2003) and a higher average amount borrowed ($33,500 in 2019, compared to $13,300 in 2003 — or about $18,350 in 2019 dollars).

The federal student loan program is designed to help students, who typically are young and financially inexperienced, obtain the means for higher education. Unlike other loans, federal student loans are disbursed to borrowers with little or no consideration of creditworthiness or repayment history and with little regard for their financial literacy.

Predictably, perhaps, repayment of student loans is often slow, with high delinquency and default rates. FRBNY found that 15 percent of borrowers in 2019 were 90 days or more in default on their student loans — an improvement from 2013, when delinquency peaked at more than 17 percent. Slower loan repayments can be attributed in part to students taking advantage of more accommodating repayment plans, loan forbearance and deferment programs.

Recognizing the impact of the student loan debt crisis, many Texas higher education experts are seeking to develop a range of solutions involving financial education and loan debt transparency.

The University Professor

A 2019 study by Southern Methodist University (SMU) Education Policy Professor Dominique J. Baker considered how well students manage their student loan debt after leaving college. Baker’s research on undergraduate students attending Texas public four-year institutions reviewed characteristics associated with debt-to-income ratios — that is, cumulative debt versus first-year earnings — above 60 percent. (This relates to a state goal for higher education stating that undergraduate student loan debt should “not exceed 60 percent of first-year wages for graduates of Texas public institutions.”)

“What I generally found is these facets of students’ characteristics, including their race and their gender, can predict whether or not these students have high debt-to-income ratios,” says Baker. Unsurprisingly, Baker found that students and families with less wealth rely more on debt.

The SMU study also found that Texas black and Hispanic students, on average, borrow $7,124 and $453 more than their white peers, respectively, while Asian students borrow $3,155 less. Financially independent students — those supporting themselves and paying their own way — borrow an average $7,660 more than their dependent peers.

Baker says that, considering the growing number of Hispanic and black students enrolled in Texas K-12 public schools, it’s likely that the number of Texas postsecondary students graduating with higher debt-to-income ratios will increase (Exhibit 1).

Exhibit 1: Enrollment by Race/Ethnicity, Texas Public Schools (K-12), 2014-15 Through 2018-19

Roll over the chart for specific values.

Year African American Enrollment Number African American Enrollment Percent Asian Enrollment Number Asian Enrollment Percent Hispanic Enrollment Number Hispanic Enrollment Percent White Enrollment Number White Enrollment Percent
2014-15 660,952 12.6 202,229 3.9 2,722,272 52.0 1,515,553 29.0
2015-16 668,338 12.6 213,394 4.0 2,767,747 52.2 1,513,027 28.5
2016-17 674,718 12.6 225,294 4.2 2,809,386 52.4 1,505,355 28.1
2017-18 680,777 12.6 235,491 4.4 2,827,847 52.4 1,504,515 27.9
2018-19 685,775 12.6 242,657 4.5 2,854,590 52.6 1,490,299 27.4

Note: Exhibit excludes students of other ethnicities and those claiming multiracial status, who collectively made up 3.0 percent of student enrollment in 2018-19.
Source: Texas Education Agency

“We want to create an economically viable state with people who are earning credentials and have manageable debt after earning those credentials,” she says. “And there are many ways that we can try to achieve that goal.”

The University President

Texas colleges and universities can better serve their students by providing more financial information and cost data, financial literacy instruction and counseling services, while developing creative partnerships with other state-funded learning institutions, says Ruth Simmons, president of Prairie View A&M University. Simmons believes this holistic approach helps improve student retention rates and improves academic success and program completion within four years.

“Timely completion continues to be a problem for many Prairie View students,” says Simmons. “To help students remain enrolled, we are raising funds to assist with emergencies, creating additional endowed scholarships and providing counseling to students who have difficulty sorting out how to manage and prioritize their expenditures. In addition, we have formed partnerships with lower-cost community colleges to help students reduce the overall cost of their education.”

Simmons says state colleges and universities should push harder to find additional private funding sources for programs that offer students the experiences and tools needed to succeed and flourish after graduation.

“Many state institutions have become too comfortable with their traditional funding sources,” says Simmons. “State funding should provide a level playing field — a base budget that guarantees access to ongoing programs for a diversity of citizens. But, to compete well in the marketplace, state college students [also] must have access to more opportunities outside the classroom: internships, field study and other activities that enable them to excel in their professional lives. Private funding is often instrumental in affording these additional opportunities.”

And, Simmons adds, Texas universities and colleges can’t cut corners to provide a quality education to the students they serve.

“The focus should always remain on the importance of an outcome that delivers high-quality education and provides the foundation for achievement in a particular career as well as the general learning that enables retooling and personal growth over the course of a person’s life,” she says.

State Efforts

According to the Texas Higher Education Coordinating Board (THECB), student debt at Texas public colleges and universities has seen relatively little growth in recent years (Exhibit 2). This is in line with THECB’s long-range strategic plan.

In 2017, the Texas Education Code was amended (PDF) to require Texas institutions of higher education (IHEs) that participate in a state financial aid program administered by THECB to notify students about the amount of their education loans borrowed to date and an estimate of their future payments.

Exhibit 2: Average Debt of Graduates of Texas Public Higher Education Institutions, 2012-2018

Roll over the chart for specific values.

Graduation Year Certificate Associate Degree Bachelor's Degree
2012 $12,225 $13,958 $24,910
2013 $12,627 $14,606 $25,556
2014 $13,480 $15,200 $26,299
2015 $13,637 $15,740 $26,116
2016 $13,546 $16,082 $26,101
2017 $13,675 $15,881 $25,948
2018 $14,028 $15,881 $25,863

Note: Excludes parent debt and bachelor’s degrees earned at community colleges.
Source: Texas Higher Education Coordinating Board

In 2019, THECB created the Financial Wellness Learning Collaborative to support IHEs as they grow their efforts to improve student financial health, provide professional development programs and create a support network for students., a THECB-hosted online college and university application tool, already offers prospective students a centralized “one-stop shop” to submit their applications to many Texas higher education institutions. Working in collaboration with the Texas Workforce Commission and the Texas Education Agency, THECB plans to add financial aid projection tools to the website, so that students and their families can compare different Texas higher education credential programs as well as expected earnings in those fields and debt-to-income ratios.

The State Commissioner

“There are very positive working relationships across agencies that we will continue to strengthen,” says Texas Commissioner of Higher Education Harrison Keller. “Working together, we can better understand what happens with students as they navigate their pathways from primary and secondary education into and through postsecondary education and into the workforce.”

Keller says he has made recommendations to THECB board members to update and refine the goals of the board’s long-range strategic plan to become more sensitive to the future value of higher education credentials in a changing economy.

“A critical point that I think gets lost in most discussions about higher education affordability is to pay attention to the value of different kinds of credentials in terms of the projected earnings of graduates,” Keller says. “We have focused more generally on whether students have to take out debt to pursue any kind of credential, and [we need to] change that to a conversation that pays more attention to the return on students’ investments.”

The idea, according to Keller, is to provide students with the information they need to make educated decisions about their lives and careers — and to strengthen the Texas economy. “As a state, we need to do a much better job of identifying and recruiting talented students into business, engineering, computer science and other fields that offer the prospect of higher projected lifetime earnings,” he says.

THECB believes the success of young Texans would assure the economic future of the state and its ability to remain globally competitive.

“The best insurance for Texas students against future unemployment is high-quality postsecondary education,” he says. “Fewer people with only a high school education will be able to get good jobs.”

In other words, he says, the better students understand their options, credentials and return on investment, the better their decisions will be about how to finance their educations.

“Within and across our higher education institutions and our communities, we have a long way to go before we can confidently say every talented Texas student can be assured of being able to take that talent and that potential as far as they can possibly go,” Keller says. “But I’m inspired by the real work happening now to expand future opportunities for Texas students.” FN

The Texas Comptroller’s office encourages parents to begin saving early for their children’s future. Visit us to learn about the state’s prepaid tuition and savings plans, scholarship opportunities and more.