Most students borrow money for college more responsibly than recent headlines might suggest.
About four in 10 college students don’t use any kind of loan to finance their higher education, while less than 2 percent of borrowers take out more than $75,000 in student loans, according to the College Board’s latest Trends in Student Aid report, released Oct. 24.
Four in 10 students borrowed less than $25,000 in student loans, with most of those students attending public four-year institutions, and 18 percent of those who borrowed the largest amounts – more than $75,000 – attended for-profit colleges.
"Overcoming financial barriers to higher education remains a significant challenge for the nation’s low- and moderate- income families, but the College Board’s latest Trends in Student Aid report highlights some positive indicators," NASFAA President Justin Draeger said in a statement. "While it is too early to know the exact significance or cause of the slight dip in student loan borrowing, additional data in the College Board report suggests that the vast majority of students borrow a reasonable amount. This suggests that efforts to relieve student indebtedness should be narrowly targeted to the outlier students who are at risk of borrowing too much."
For the second year in a row NASFAA surveyed members to gather data on institutional loans for the College Board report. The institutional loan survey found a 1% increase in institutional loan volume (to graduate and undergraduate students) from $720 million in 2010-11 to $730 million in 2011-12.
The Trends report also shows that low-income families are more in need of student aid than anytime in the past 30 years. Inflation-adjusted income has plummeted for families in the bottom 20 percent of earners, dropping 14 percent since 2001. Those families saw a 14 percent increase in income from 1991-2001.
Families in the top 20 percent of household incomes have seen the least impact over that span, according to the report.
Dwindling state-provided student aid is no longer targeting low-income students who need it most. During the 2010-11 academic year, state grant aid dropped by 2 percent from what it was five years earlier.
The percentage of state grant dollars for undergraduate students distributed without regard to students’ financial circumstances increased from 9 percent in 1985-86 to 14 percent in 1995-96, before jumping to 28 percent in 2005-06, and to 29 percent in 2010-11.
This has been somewhat offset by institutional grant aid which has become increasingly need-based – a trend driven, perhaps, by an "increased need created by a combination of rising prices and deteriorating economic conditions," according to the College Board report.
The federal government and higher education institutions have made significant strides to help these low-income families. From 2001-02 to 2011-12, institutional grant aid almost doubled and federal grant aid grew by 185 percent after adjusting for inflation. The maximum Pell Grants awarded during the 2011-12 academic year, when adjusted for inflation, were almost equal to the most generous Pell awards in 1976, although the number of Pell recipients increased fivefold over that span.
The annual report, detailing student aid trends across higher education, showed that while a recent surge in financial aid tapered off last year, private student loans returned to 2001 levels after skyrocketing to an all-time high of $22.9 billion in 2007-08.
College Board’s data indicate students are generally borrowing responsibly, easing away from risky private loan options. Still, higher education cuts at the state level have shifted the cost burden onto students, their families, the federal government , and colleges and universities.
Publication Date: 10/24/2012