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Journal of Student Financial Aid
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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