Higher Education Reports
Search
•
RSS Feed
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.
|
