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Disconcerting Data on Student Debt

July 9, 2009

You'd have to have been living under a rock not to know that student loan debt is a problem, and getting worse. The issue has become a stock part of politicians' speeches (including the new president's), motivated the creation of advocacy groups, and been the thesis of numerous conferences and reports.

But an analysis released today by a Washington think tank, based on newly available federal survey data, aims to show that the steady, long-term growth in student borrowing has intensified in recent years, and that student borrowers have increasingly turned to more expensive "alternative" loans to meet their escalating college bills.

The report from Education Sector, which bears the none-too-subtle title "Drowning in Debt: The Emerging Student Loan Crisis," digs more deeply into federal data that the Project on Student Debt explored upon their release last spring. The data, from the National Postsecondary Student Aid Survey, show an uptick (though a comparatively small one) between 2003-4 (when the survey was last conducted) and 2007-8 in the proportion of all students who took out loans of some kind.

More troubling, to the authors Erin Dillon and Kevin Carey, is the sharper increase of the average amount borrowed by those who took out loans, particularly at private nonprofit and for-profit colleges, and the dramatic rise in the proportion of all undergraduates who have private loans, up to 14 percent in 2007-8 from 5 percent in 2003-4. The latter proportion was 27 percent at four-year private colleges and 43 percent at for-profit colleges, and 22 percent among black students and 19 percent among white students.

"Since the last iteration of NPSAS, the whole system of financing students' higher education has broken out of the government-regulated, government-subsidized arena that it's been confined to for years," said Carey, Education Sector's policy director.

The report's authors assert that students have increasingly had to turn to private loans because, as colleges have sent their tuitions soaring ever higher, states and institutions themselves have shifted their financial support for students away from those in the lowest income brackets and toward those who need it less.

And while the Obama administration is proposing major changes in the loan programs designed to increase the availability of federal grant aid and lower-cost, federally backed Perkins Loans, "the president's proposals do nothing to address the single biggest driver of higher education unaffordability: rapidly escalating tuition costs," the authors write. "Until federal and state governments work with institutions to restrain prices while simultaneously re-focusing financial aid on needy students, the tide of college debt will continue to rise."

Despite the aforementioned consensus that student loan debt is a problem, there are a range of views about just how big a problem it is -- and the Education Sector report will stoke that disagreement.

Patricia Steele, a research associate at the College Board, said that "nowhere in the report" do the authors point out that half of all students don't borrow for college at all, and that that and other oversights contribute to the report's overall "sense of hype."

"It's important to point out because it scares the hell out of low-income students, who are nervous enough about whether they can afford college," Steele said. "They might read about this and think everybody's out there borrowing $35,000, and that's just not true.... This does not represent the core of what's happening in student debt."

 

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