A 'Sky is Not Falling' Study on Loan Debt

Amid the torrent of reports and calls to arms about the dangers of growing student loan debt comes a study suggesting that things might not be quite as bad as they seem.

June 29, 2005

Amid the torrent of reports and calls to arms about the dangers of growing student loan debt comes a study suggesting that things might not be quite as bad as they seem.

The American Council on Education's "Federal Student Loan Debt: 1993 to 2004" pulls together several reports based on the U.S. Education Department's National Postsecondary Student Aid Study to suggest that while overall levels of student borrowing have continued to grow, the median college graduate does not end up with a significant student loan debt burden. (The study does note that debt problems are growing for certain groups of students, particularly graduate students and associate degree recipients from for-profit institutions.)

"We're trying to put context around the perception that debt is running out of control," said Melanie Corrigan, associate director of ACE's Center for Policy Analysis, which produced the report. "The perception is that everybody's borrowing, and everybody's borrowing $25,000, when that's just really not the case."

The ACE study is based on data from the federal student aid study from 1992-93 and 2003-4, which show that student loan volume ballooned from $19.8 billion to $50.5 billion and that the number of loans made more than doubled. Further, the statistics reveal that 62 percent of students who received bachelor's degrees in 2003-4 graduated with student loan debt, and that the median debt of those students was $14,671 at public institutions and $17,125 at private ones, up substantially from 1992-93.

Those are the sorts of numbers that get advocates for students and critics of the loan industry worked up, criticizing students' increasing dependence on loans rather than grants in the federal student aid system.

But the ACE study cites other numbers that it says suggest that the problem is not so severe. It notes, for instance, that the proportion of bachelor's degree recipients who borrowed held steady from 1999-2000 to 2003-4, and that the median amount they borrowed declined in real terms. And the bottom line, says Corrigan, is that even those who borrow don't end up with crushing debt.

"A third of all B.A. recipients do not borrow a dime, and of those who do, the median amount they're borrowing is $16,500," she said. "For the vast majority of students, that's going to be a manageable payment. Borrowing $16,500 for your bachelor's degree is not a sounding board for crisis."

The ACE study acknowledges, however, warning signs among some groups of students. Among them:

  • Recipients of master's degrees sharply increased their borrowing between 1999-2000 and 2003-4, with their median amount rising from $18,578 to $26,119 in real dollars, or 41 percent, over that period. Doctoral students, too, saw the median amount they borrowed rise by 45 percent from 1999-2000 to 2003-4, the study found.
  • Low-income dependent students saw the smallest change of all income groups in both the percentage who borrowed and the median amount borrowed, but they remained more likely to graduate with student loan debt than other B.A. recipients. Low-income independent B.A. students and associate degree recipients at for-profit institutions, meanwhile, "borrowed at levels that suggest a substantial share of these students may experience difficulty in repayment."

The report also notes that borrowing through private loans, which are generally more expensive than federal loans, is sharply on the upswing.


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