College Students Relying More on Student Loans

A new report by the Pew Research Center shows that reliance upon student loans among college students increased dramatically between 1996 and 2008.

The survey, analyzing data collected by the U.S. Department of Education for the quadrennial National Postsecondary Student Aid Study, examined borrowing trends among graduates in the class of 2008 and made comparisons using inflation-adjusted dollars.

Overall, the Pew analysis revealed that bachelor's degree recipients in 2008 borrowed, on average, 50 percent more in student loans than bachelor's recipients who graduated in 1996, while students who were awarded an associate's degree in 2008 borrowed more than twice what that their 1996 counterparts did.

The report indicates that three significant factors are driving the increased use of student loans:

* A greater proportion of college students are taking out student loans.
* The college students who take on student loans are borrowing in larger dollar amounts.
* More college students are attending for-profit colleges, where student loan debt is highest and most widespread.

A Rise in Debt From College Loans Across the Board

The Pew study notes that students in the class of 2008 were more likely to take out college loans than students in the class of 1996, regardless of the type of school they attended. In addition, the amount of money students are borrowing is increasing.

Among students at public colleges and universities, 60 percent of 2008 graduates took out student loans to pay for their education, while only 52 percent of graduates in 1996 did. At private nonprofit schools, 72 percent of graduates financed their undergraduate degrees with student loans, up from 59 percent in 1996. And nearly all graduates of private for-profit colleges in 2008 — 95 percent — took out student loans, compared with 77 percent in 1996.

The amount of student loan money being borrowed has also grown at every type of school, for every type of degree.

Graduates earning four-year degrees who took out student loans, regardless of institution type, borrowed about $6,200 more than did their 1996 counterparts. Graduates from all institution types who sought associate's degrees took on about $5,600 more in student loan debt than associate's degree–earners in 1996. Among students who earned certificates, average student loan debt loads increased by more than $4,100 between 1996 and 2008.
Student Loan Debt Highest at For-Profit Colleges

Nearly one-fourth of all bachelor's degree students enrolled at for-profit colleges graduated with more than $40,000 in student loan debt, and more than half accrued over $30,000 in college loans.

In comparison, only about 5 percent of bachelor's students enrolled in public or private nonprofit schools graduated with student loan debt loads that exceeded $40,000. At private nonprofit colleges, 25 percent of all bachelor's degree students graduated with more than $30,000 in college loans, and at public colleges and universities, just 12 percent of bachelor's students did.

The trend toward increased student loan borrowing also appeared among students who sought two-year degrees, although students enrolled in public institutions borrowed significantly less than their peers at private for-profit and private nonprofit schools.

One fourth of associate's degree–earners and certificate-earners at both private for-profit and private nonprofit schools borrowed $20,000 or more to complete their degrees, compared to only about 5 percent of two-year degree-seekers at public colleges.

Among students earning associate's degrees at for-profit colleges, 17 percent took on more than $30,000 in student loans.

According to the Pew report, students who accumulate $30,000 in student loan debt can expect payments of about $350 per month for a repayment term of 10 years, assuming a fixed 6.8-percent interest rate on the loans — the standard interest rate for federal unsubsidized Stafford student loans.

Students who take out non-federal private student loans will typically have a higher interest rate on those loans, with a higher monthly payment.