Palo Alto, California - April 23, 2008 - A student loan bill that recently passed the House of Representatives has a significant opportunity to reduce the demand for private student loans, according to research from Student Lending Analytics (SLA). H.R. 5715 "Ensuring Continued Access to Student Loans Act of 2008" would increase the borrowing limits on unsubsidized Stafford loans for dependent students by $2,000 and for independent students by $6,000 or $7,000 depending on their year of study.
SLA's research indicates that if, on average, half of undergraduate Stafford borrowers who have already reached their borrowing limits, took advantage of the increased loan ceilings, approximately $6.8 billion in new Stafford borrowings would result. To provide some context, the College Board indicated that undergraduate loans from the private sector totaled $14.5 billion for the 2006-2007 school year. While some of the new Stafford borrowing will substitute for higher interest rate Parent PLUS loans, much of it should help to reduce students' need to access private loans, which have been the fastest growing source of financing for students.
The importance of the Stafford loan program and the need for its limits to be increased is evident by the following:
- In 2006-07, 6.1 million Stafford loan borrowers (about 1/3 of all undergraduate students), borrowed $30.1 billion (College Board, Trends in Student Aid 2007).
- The Stafford borrowing limits had remained fixed from 1993-94 to 2006-07.
- On July 1, 2007, the annual borrowing limits were increased by $875 for freshmen and $1,000 for sophomores but the overall limits were maintained.
- During the period from 1996-97 to 2006-07, borrowing from private loan sources increased from $1.4 billion to $14.5 billion, an 894% increase based on College Board's Trends in Student Aid 2007.
- SLA estimates that 79% of dependent undergraduates and 45% of independent undergraduates borrowed at the maximum levels for Stafford loans in 2006-07.
- Source: NCES, Trends in Undergraduate Borrowing II (2003-2004) indicated that 73% of dependent students and 36% of independent student borrowers took out the annual Stafford maximum. This report indicated that rate for dependent students was growing at 2% per year since 1995-96 and 3% per year for independent students. SLA extrapolated this growth forward to arrive at the 2006-07 figures.
ABOUT STUDENT LENDING ANALYTIC
Student Lending Analytics provides research and advisory services to assist financial aid officers in their lender selection process. SLA utilizes financial models and proprietary surveys to provide a customized, objective and analytical approach to selecting the best student lenders. For additional information on Student Lending Analytic's research and services, contact Tim Ranzetta (see contact information below) or visit www.studentlendinganalytics.com.
CONTACT:
Contact Person: Tim Ranzetta
Company Name: Student Lending Analytics
Voice Phone Number: 650-218-8408
Email Address: tranzetta@studentlendinganalytics.com
Website URL: studentlendinganalytics.com
Posted 04/24/08 to www.NASFAA.org. Posting of press releases is done as a service to Members and does not imply endorsement or support by NASFAA. NASFAA does not review this information for content or accuracy.
