What Determines the Amount Students Borrow? Revisiting the Crisis–Convenience Debate

    Volume 38, No. 1, 2008 p. 17 

    by Natala K. Hart and Shoumi Mustafa

    Recent studies have questioned the wisdom in blaming college costs for the escalation of student loans. It would appear that less affluent students borrow large amounts because inexpensive subsidized loans are available. This study attempted to verify the claim, estimating a model of the amount of loan received by students as a function of net total costs after grants, scholarships, and tuition discounts, and of the availability of subsidized loans. Results showed large effects of net cost, especially for poor students, who used low-interest subsidized loans to replace more expensive loans. In contrast, middle-income students increased borrowing in response to increased availability of subsidized loans, although such responses were small relative to the impact of net costs