Students at Iowa State graduate with significantly higher debt than students at the other regent universities, according to the state Board of Regents.

The annual Board of Regents report on student financial aid showed the average ISU student graduated last year with an $18,406 debt, about $1,600 more than the previous year.

The average 1999 ISU graduate owed almost $3,300 more than the average University of Iowa graduate and about $1,400 more than a University of Northern Iowa graduate, according to the report. Compared to the previous year, the average debt at UNI rose about $250, and at U of I went down almost $400.

But Earl Dowling, director of financial aid for ISU, said those figures were misleading.

“It’s not that Iowa State students are borrowing more — they are borrowing the same,” Dowling said. “The survey is skewed. We elect to emphasize a private-loan program because of the added benefits it provides to students.”

ISU encourages students to take advantage of partnership loans, which must be reported for the regents’ survey, as opposed to PLUS loans (Parent Loan for Undergraduate Students), which are not included in the report. The universities are required to report private loans but not parent loans, he said.

“If we had not offered our students more flexible loan options — one that has less interest rates and less fees — and only offered them the PLUS program, we would have shown a less average student-loan indebtedness,” he said.

Dowling said ISU students and parents generally prefer the partnership loan over the PLUS loan, causing the drastic difference in the report numbers.

“If a family and student compare the benefits under the PLUS loan and the partnership loan, they see that the partnership program is a better deal,” he said.

The interest rate on a partnership loan is 6.22 percent, whereas the rate on a PLUS loan is 7.72 percent. In addition, the partnership loan fee is 0 percent to 2 percent, and the PLUS loan fee is 4 percent, he said.

“The origination fees on the PLUS loan are twice the fees on the partnership loan,” Dowling said. “Because we offered this private loan, our students took advantage of it.”

U of I encourages students to use the PLUS loan before the partnership loan, said Mark Warner, director of financial aid at U of I.

“Parents should have the obligation before the student,” he said. “The real issue is whether the student or parent should be borrowing.”

The major difference between the two types of loans is that the partnership loan is an additional debt the student assumes, Warner said.

“The purpose of the PLUS loan is to allow parents to borrow what is expected to be borrowed,” he said.

A student fills out a FAFSA (Free Application for Federal Student Aid) form, which determines what contribution his or her parents should be responsible for, Warner said.

“The PLUS loan provides what the federal formulation says it should,” he said. “The expected parental contribution should be the parents’ obligation.”

Dowling said the Board of Regents’ survey is inaccurate because “one school does not have to report its $15 million PLUS program, but we have to report our $17 million private-loan program.”

If the ISU partnership program were ignored in place of the PLUS program, then the average student loan indebtedness would be shown as less than $17,000, Dowling said.

“What has not received media attention is the fact that, of last year’s graduating seniors, approximately one-third of our students graduated debt free,” he said. “This number can be compared to 27 percent at Iowa and 18 percent at UNI.”

Dowling said ISU established the partnership loan in response to requests of students and parents.

“We entered into this partnership with the Iowa Equity Loan Association in order to address the needs of families,” he said.

Warner said all three regent universities are attempting to counsel students and parents more effectively.

“We are trying to talk to students and parents in order to minimize annual indebtedness,” he said.

Warner said there has been some success in stressing that students and parents “need to borrow out of need, not out of choice.”