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 The
Burden Of Borrowing
A report on the rising rates of student loan debt
The
State PIRGs' Higher Education Project
Executive
Summary | News Release
Download the full report.
Executive
Summary
Higher
education is critical to the future success of Americans.
In addition to the inherent benefits of a higher education,
a college degree is worth 75% more than a high school diploma
or more than $1,000,000 over a lifetime in the workforce.
However, as college costs continue to swell, students are
increasingly shouldering high levels of debt to pay for a
college education.
Thirty-nine
percent (39%) of student borrowers now graduate with unmanageable
levels of debt, meaning that their monthly payments are more
than 8% of their monthly incomes. According to new data from
the Department of Education’s National Postsecondary Student
Aid Study (NPSAS), not only are the majority of students turning
to loans to finance college, but debt levels are also escalating.
In 1999-2000, 64% of students graduated with student loan
debt, and the average student loan debt has nearly doubled
over the past eight years to $16,928.
Often
the students who are most likely to graduate with debt are
the same students who experience financial hardship after
graduation. In 1999-2000, 71% of students from families with
incomes less than $20,000 graduated with debt, compared to
44% of students from families with incomes more than $100,000.
In all likelihood, students from low-income backgrounds receive
limited financial assistance from and may have financial obligations
to their families after graduation.
In addition,
some groups of students are more likely to face unmanageable
debt burden after graduation. Fifty-five percent (55%) of
African-American student borrowers and 58% of Hispanic student
borrowers graduated with unmanageable debt burden.
Data also
suggest that Pell grant funding impacts borrowing trends among
low-income students. Over the past decade, when Pell grant
funding was cut, the percentage of low-income students who
borrowed and the average debt among these students increased.
In contrast, in recent years, when Congress increased Pell
grant funding, the percentage of low-income students who borrowed
stabilized, while growth in the average debt among these students
slowed.
There
are several possible explanations for increases in student
borrowing. First, the strength of the Pell grant has declined
from covering 84% of tuition at a four-year public institution
in 1975-76 to 39% today. 1 While Congress has increased funding
in recent years, the Pell grant maximum has not been able
to keep up with inflation and rising tuition costs. As a result,
low-income students are forced to borrow to cover that unmet
need. Second, wealthy families may be shifting more of the
cost of college from savings to student loans. Also, as tuition
increases faster than inflation and median income, students
overall are facing increasing levels of need.
We need
to look for solutions that make college more affordable and
protect students from unmanageable debt burden. Congress should
increase grant aid funding, reduce the cost of student loans,
and provide flexibility within the student loan program to
help make college more affordable for all Americans.
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