Why do Students Borrow so Much?

Trends in student loan lending may explain why

Let’s face it: to afford185694940 attending college in this day and age, many students need to take out a loan (or several). Each year, more and more students are graduating college with thousands in student debt that they need to pay back.

In fact, between 2007 and 2012, student loan amounts increased 75 percent, according to a TransUnion study. It’s one of the biggest causes of debt as in 2010, student loan debt surpassed credit card debt for the first time, rising to more than $800 billion.

Specifically, the amount of undergraduate loan recipients has grown substantially, going from 19 percent in 1989-1990 to 35 percent in 2007-2008. The amount being borrowed per person has also risen. Research shows the amount of postsecondary education students who borrowed using federal student loan programs increased from $24 billion from 1994-1997 to $33.7 billion in 1999-2000. In addition, the amount of debt for those getting their master’s and other advanced degrees more than doubled.

So what’s the deal?
“Increases in federal grant aid have not kept pace with rising costs, and students’ financial needs have increased as educational costs have risen,” explains an excerpt in the Eric Institute of Education Sciences, an online database of education research and information, sponsored by the Institute of Education Sciences of the U.S. Department of Education.

While the obvious answer for the increased borrowing is the rise in tuition costs, research says it may also be that loan programs are expanding, allowing those from middle and upper income families to borrow with little difficulty.

“Increases in loan limits and the ease of borrowing have allowed more students to receive loans,” the study states.

“Because students may receive unsubsidized loans regardless of their families’ incomes, a large share of the added loan dollars appear to have gone to students from middle- and upper-income families,” notes an article on http://www.education.com.

According to the U.S. Department of Education, the percentage of undergraduate students from families who make an annual income of $60,000-$79,000 who used federal student loans jumped from 56 percent in 1992-1993 to 67 percent in 1995-1996. And since students from middle- and upper-class families who may not have necessarily qualified to receive Stafford Subsidized Loans have become eligible, studies predict some students may be borrowing more than they need in order to attend postsecondary education.

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