"More and more, we are seeing students come in whose parents are still paying off students loans. I recently read an article that reported that, for all intents and purposes, students are indentured to student loan debts for upwards of 25 years."
Ralph Ferguson

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Ralph Ferguson

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PEOPLE WITH IMPACT INTERVIEW - Ralph Ferguson, Associate Dean, Graduate Students, Texas Tech University

Texas Tech University has implemented an innovative loan program that has yielded tremendously helpful outcomes for student persistence. In the following interview, Dr. Ralph Ferguson, Associate Dean of the Graduate School, discusses the Gelin Emergency Loan program and comments on the importance of engaging in dialogue with students regarding their borrowing histories.

Q: Can you explain the micro-lending and emergency loans utilized by Texas Tech? What byproducts have emerged as a result of this offering?
Ralph Ferguson:

At Texas Tech, we offer what is called the Gelin Emergency Loan. It was set up several years ago by Mr. Carl S. Gelin, who donated a $1 million to graduate school. The motivation behind this gift was Mr. Gelin’s experiences as a young man looking to pursue graduate education at Texas Tech. At that time, he was in need of assistance and he remembered that frustration when seeing that same frustration in today’s student population. The Gelin Emergency loan was designed to help students with emergency medical or family problems, food, shelter and or other unanticipated needs. Sometimes, the monies are requested for research if the students do not receive a grant and are forced to borrow funds to support their investigation. The emergency loan is offered in the amount of $500 or less, or between $500 and $2,500, the maximum amount, and all loans are provided at zero interest so long as the student continues to pay on time. Students have up to five years to pay off the emergency loan. What is nice about this loan offering is that the rate of reimbursement is low and the payments are entirely manageable.

A noticeable byproduct of the Gelin Emergency Loan is increased dialogue with students in regards to their educational lending and financial situations. Students come in and we have the opportunity to talk to them about where they are at with loans, as most graduate students are taking out additional student loans on top of the debt they’ve likely accumulated at undergraduate level. This interaction are extremely important because for many students, borrowing for education is commonplace, yet they often do so without considering that the funds must eventually be paid back. Similarly, some students choose to utilize credit cards to finance their graduate education, pushing aside the fact that they must also repay those monies. The majority of the population that requests the Gelin Emergency Loan are up against the wall for a healthcare or academic issue or due to outright mismanagement of funds. The loan offers relief for the students, but also provides a platform through which we can address their situation in the context of the big picture, or in other words, if the money will help them succeed and graduate. Graduate students often have to leave programs due to financial hardships that require them to work, after which time they come back and reapply. Not only is the reapplication process a hassle, but those students that leave for over six months often have their loans are called and they must begin repaying their debt along with accumulating more. A lot of issues come into play with students in need of an emergency loan, and in our case, we are in the unique position to counsel them to achieve that benchmark moment of graduation.

Q: Would you consider the Gelin Emergency Loan and the accompanying financial planning conversations a retention technique?
Ralph Ferguson:

Yes, I would definitely consider the offering and ensuing dialogue a retention technique of sorts even though this was not the initial thinking when we implemented the program. I’m a management and financial person, so my initial thinking was that students are already heavily in debt I almost felt it irresponsible and illogical to loan them more money. However, after talking to the first group of emergency loan candidates, it became clear that this could promote awareness of students’ personal history of academic borrowing. It soon became very clear that students were overlooking a key consideration of borrowing—that average starting income in their chosen discipline. For instance, a recent graduate with an English major might teach in the public school system and their starting salary would range between $25,000-$35,000, 1/3 of which is taxed. They might also need to relocate, and if they are facing repayment of a $25,000-$35,000 loan, most find the costs to be unmanageable. Another factor to consider is that most students at university marry students at university, if your companion has $40,000 in debt and you do as well, you are starting your lives together almost $100,000 in debt. We sit down with students at Texas Tech and say “Here’s where you are and this is what it’s going to take to get you out of here.” Often times we will deter students from the emergency loan and encourage them to try to persist on what they have—some can and some can’t. All we want to do is offer responsible advice and enlighten students to aspects of their debt that they might have overlooked. .

Q: What implications does the current state of student borrowing have for the future of higher education?
Ralph Ferguson:

More and more, we are seeing students come in whose parents are still paying off students loans. I recently read an article that reported that, for all intents and purposes, students are indentured to student loan debts for upwards of 25 years. Students are even going so far as to change majors into a difference discipline , considering that in the typical service positions—teachers, social workers, and the like—a good chunk of meager earnings will go toward paying off debts rather than enjoying being an educated, middle-class individuals buying homes and building a future. Fear of unmanageable salary versus debt ratios will eventually mean fewer people in public schools teaching future generations and less social service workers, and it all comes down to the level of debt after they complete their education. We have now passed legislation where students can no longer bankrupt their student loans due to a high level of abuse of that opportunity. On average, students are borrowing about a $100 billion annually and we’re graduating between 3-6 million students, 60% of whom have reasonably high debt. We need to ask ourselves if we want to continue this process. Prior to 1984, there were more grants and fewer loans. After the reauthorization bill of 1984, education was deemed a personal good rather than a public good, and students were encouraged to borrow more while the grant systems began to scale back. We’ve been graduating students with this high level of debt for the last 20-30 years, and its taking them longer and longer to enjoy the fruits of their education. Universities continue increasing tuition costs, requiring students to borrow more or work full or part time to stay on par, a reality that could negatively affect persistence. It is truly profound what impact it can have to counsel students on debt and lending early and address their financial situations now.

The trends in student borrowing signify a problem—if costs continue to rise and debt continues to mount, my concern is that we might see fewer students going to grad school. For a market economy, that’s a bad thing. When you look at community leaders across the nation in both organizations and public service, the great many have higher education—Masters degrees, PhDs, law and medical degrees. The fear is that the underrepresented populations that will have less opportunities to pursue higher education should the costs become too intimidating. It is also important to consider that this dilemma will potentially cross all ethnic lines.

People with graduate degrees are excellent wage earners and good tax payers, and they generally provide products that enrich communities in a more profound may than those with undergraduate degrees. Graduate education encourages enriching philosophies of thinking , key attribute of leaders. It would be a tremendous shame to lose the diversity in this population of leaders due to dollars and cents and because households are less able to afford college. These are implications that things we must anticipate down the line—but they’re beginning to happen now. We need to consider the ramifications of the current system—if students need to borrow more and more, what does that mean for the future? Do we want to set up a situation that will solely allow people with privileged resources to access universities and get a degree? It’s important to consider that education was put in place by our founding fathers because an educated population is a prerequisite to thrive in a market economy. Education, in reality, is a public good, and therefore should be accessible to all students.

Ralph Ferguson, Associate Dean, Graduate Students, Texas Tech University