With the national student debt level surpassing $1.75 trillion, the post-Covid return of loan repayments and the recent Supreme Court ruling on debt forgiveness, student debt has been a hot topic in the news in recent months. However, discussions focusing on only one side of a complex issue ignore the nuanced factors that contribute to the true value of a college education.
Loans can undoubtedly place financial strain on students and their families, and they point to larger issues Americans face in accessing higher education. On the other hand, loans can open doors to college for those who would otherwise not be able to attend and reap the monetary and nonmonetary benefits of higher education. A more balanced approach considers the financial costs of college in conjunction with its financial value-add, for example, by examining debt-to-earnings ratios.
Student debt-to-earnings (DTE) ratios show how much students spend on their college education compared to how much they earn after that education. Navi Dhaliwal, economic analyst at the Research Institute at Dallas College, explains, “Both debt and earnings are important factors, but debt is more transitory than earnings. Earnings trajectories affect a student’s future financial well-being over the course of their lifetime, while debt can be repaid, if held at a manageable level. A healthy debt-to-earnings ratio is critical during the early years of a student’s post-college career to maintain repayments and eventually pay off student loans.”
Research tools
The Research Institute explores DTE ratios in several new reports and tools. The recent report “Debt and Earnings at Dallas College: A Review of Academic Programs in State and National Context” uses student loan debt and post-college earnings data from the federal College Scorecard and the Texas Higher Education Coordinating Board to study program-level differences at Dallas College and nationwide. Results can be analyzed at the institutional level, that is, how well a college’s students are doing overall in terms of debt and earnings.
“The community college sector, including Dallas College, has healthy debt-to-earnings outcomes for credential completers, with around 98% of Dallas College students graduating with no or manageable levels of debt,” according to Dhaliwal. “However, a major challenge for community colleges is low completion rates. When students accrue debt without completing a credential, they’re often left in a perilous financial position. Over the past few years, Dallas College has invested deeply in making sure setbacks don’t derail students from finishing college, through initiatives like success coaching and its Student Care Network.”
Digging into the data
Even if a particular institution touts high DTEs among its alumni, individual-level factors like choice of major, credentials pursued, completion status and job placement create significant variability. Some commonly accepted myths, such as four-year degree earners always having better financial outcomes and job prospects than two-year degree graduates, prove to not always be true when analyzing at a more granular level.
“Associate degrees can offer a lower-debt, faster option compared with many bachelor’s degree programs, and when aligned with workforce needs, employment prospects can be strong with an associate degree alone. Bachelor’s degree programs often incur a larger investment in time, money and debt. In the long run, however, average earnings tend to be higher with bachelor’s degrees,” explains Dhaliwal.
A dynamic dashboard
Ultimately, choosing a college pathway is a balancing act that myriad personal circumstances and decisions factor into. To that end, the Research Institute’s tools allow users to explore DTE ratios with their own selection of variables. Accompanying the DTE report is an interactive debt-to-earnings dashboard that compares federal student loan debt accumulated in college to earnings one year after completing a college degree or certificate. Users select variables of their choice — including institution, field of study and credential level, among others — to explore specific academic-to-career pathways with the healthiest debt-to-earnings ratios. A debt calculator estimates total debt (based on time in college and interest rate) as well as potential earnings (based on field of study and institution) to provide personalized debt-to-earnings ratios.
David Mahan, executive director of the Research Institute, explains the power behind such tools.
“These dashboards are the first of their kind in the way they allow for the comparison of pathways through fields of study and into careers from multiple, simultaneous perspectives,” he says. “Students and their journeys are so unique. We can’t analyze or predict financial returns based on a sole factor, such as wages or credentials; the figures generated in the dashboards will more closely reflect real, lived experiences.”
In addition to variables related to academic and professional pathways, Research Institute DTE tools can separate results by students’ individual characteristics, including gender, race/ethnicity, income level and dependency status. Dallas College, like other community colleges, serves a diverse population of students. Examining group-specific outcomes is imperative in identifying any equity gaps; only then can the institution respond in ways that ensure all student groups realize manageable levels of debt and healthy potential earnings after college.
While the DTE dashboard and report were created for a more technical audience, the Research Institute’s work remains publicly available via its website for anyone who wants to explore the details. In the meantime, the Institute is working to distill its more complex findings into user-friendly formats for students and families, such as the new Value of College Dashboard.
Recognizing that minimizing student debt plays a critical role in creating manageable debt-to-earnings ratios, Dallas College is investing in innovative, low-cost offerings like the bachelor of science in early childhood education (BAS ECE) program, the first bachelor’s degree program in education offered by a community college in Texas. Dallas College BAS ECE graduates pay less than $2,500 per year in tuition, one-fifth the cost of comparable degrees at public four-year universities in the north Texas area, yet graduate with the opportunity to earn livable, sustainable wages near $50,000 as early childhood teachers.
