Student Debt Susan Choy MPR Associates Berkeley, California SHEEO Professional Development Conference Seattle, August 2005

2 Why Student Debt Has Increased  Growth in tuition and fees has outpaced growth in median family income –From 1993–94 to 2003–04, after adjusting for inflation Tuition at public 4-year institutions increased by 44%Tuition at public 4-year institutions increased by 44% Tuition at private institutions increased by 35%Tuition at private institutions increased by 35% Median family income (ages 45-54) increased by 6%Median family income (ages 45-54) increased by 6%  1992 reauthorization of the Higher Education Act –Expanded eligibility for student aid –Raised loan limits –Introduced unsubsidized loans for all students, regardless of need

3 Growth in Student Loan Volume (Constant 2003 Dollars) Source: The College Board, Trends in Student Aid, 2004

4 Percent with Student Loans Undergraduates Total Public 2-year Public 4-year Private 4-year Percent

5 Average Amount in Student Loans Undergraduate Borrowers ,100 $10,000 8,000 6,000 4,000 2, ,800 3,600 3,300 4,800 5,600 Average amount 6,200 6,900 Total Public 2-year Public 4-year Private 4-year

6 Percent with Student Loans, by Income Full-Time, Full-Year Undergraduates 50%46%53%49%48%48%38%57%45%45%51%49%47%42%29%49%Total Dependent students Less than $20,000 $20,000-39,999$40,000-59,999$60,000-79,999$80,000-99,999 $100,000 or more Independent students

7 Average Amount in Student Loans, by Income Full-Time, Full-Year Undergraduate Borrowers $6,2005,2005,4005,7005,7005,8005,8007, $5,4004,7004,9004,7004,9005,1005,2006,800Total Dependent students Less than $20,000 $20,000-39,999$40,000-59,999$60,000-79,999$80,000-99,999 $100,000 or more Independent students % Change

8 Percent with Student Loans Graduate and Professional Students Master’sDoctoralProfessional Percent

,400 $30,000 20,000 10, ,600 17,800 13,200 Average amount 20,000 26,400 Master’sDoctoralProfessional Average Amount with Student Loans Graduate and Professional Student Borrowers 25,000 15,000 5,000

10 Grants vs. Loans Percent Share of Total Aid, to Source: The College Board, Trends in Student Aid, 2004

11 Paying for College: 4-year Institutions (Constant 1999 Dollars) Full-time Dependent Undergraduates FamilyGrants 10,000 $25,000 15,000 10, ,400* ,000 5,000 8, ,200 2,500* 1,900* ,400 12,800 4,000 2,000 4,800* 6,800* 19,400 24,400* Public 4-year Private not-for-profit 4-year Loans *Represents statistically significant change from Average amount

12 Paying for College: <4-year Institutions (Constant 1999 Dollars) Full-time Dependent Undergraduates Grants 7,300 $25,000 15,000 10, ,500* Average amount ,000 5,000 7,000* 6, * 1,100* ,000 8,800* 1,700 3,1005,400* 1,800 14,700 16, Public 2-year Proprietary, <4-year Loans *Represents statistically significant change from Family

13 Percentage of Bachelor’s Degree Recipients Who Borrowed Percent

14 Average Amount Borrowed Bachelor’s Degree Recipient Borrowers (Constant 1999 Dollars) $25,000 20,000 15,000 10,000 5, ,300 12,100 Amount borrowed

15 Average Monthly Payment (Constant 2001 Dollars) $ Monthly payment

16 Average Annual Salary (Constant 2001 Dollars) 28,300 $40,000 30,000 20,000 10, ,100 Annual salary

17 Percentage Distribution of Loan Repayers by Debt Burden Percent <5% %9-12%13-16%17%+ Median: <5% %9-12%13-16%17%+ Median:

18 Summary  Student borrowing continues to increase, especially unsubsidized Stafford loans and alternative loans  Largest increases in percent borrowing have been at the high income levels, while the largest increases in average amount borrowed have been at the middle-income levels  Grant aid has increased, but loans once again account for a greater percentage of total aid

19 Summary (continued)  Price increases have been absorbed by increased grants and loans rather than current family outlays  For bachelor’s degree recipients, borrowing has increased, but salaries have increased and interest rates have declined, leaving debt burden relatively unchanged

20 For More Information L. Berkner et al., National Postsecondary Student Aid Study (NPSAS:2004): Student Financial Aid Estimates for 2004 (NCES ) L. Berkner et al., National Postsecondary Aid Study (NPSAS:2004): Undergraduate Financial Aid Estimates for by Type of Institution (NCES ) Choy, S. and Li, X., Debt Burden: A Comparison of and Bachelor’s Degree Recipients a Year After Graduating (NCES ) Choy, S. Paying for College (NCES ) The College Board, Trends in Student Aid, 2004