Students Deeper In Debt

December 1, 2006
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GRAND RAPIDS — It shouldn’t surprise anyone that more students are borrowing money to pay for their advanced-degree programs today than a decade ago.

But what might come as a surprise, or possibly even a shock, is how much more they have to borrow today than their counterparts in the early 1990s did. That staggering difference is documented in a 2004 report from the U.S. Department of Education.

In the 1992-93 school year, 49.3 percent of all college students — undergraduates and post-graduates — went into debt for their education. But in 1999-2000, 65.4 percent did. In 1992-93, the average debt burden was $12,100; seven years later, that figure had risen by 59 percent to $19,300.

Some of the increases were even higher for students enrolled in advanced-degree programs than they were for undergrads.

For instance, in 1992-93, 45.5 percent of doctoral students at public universities borrowed for their education. Seven years later, that figure rose by 18 percent to 63.6 percent. But the largest percentage of student borrowers that school year was master’s degree students enrolled at private colleges, as 71.5 percent of them went into debt.

The group that went into the deepest debt in 1999-2000, however, was doctoral students at private universities. They borrowed 67 percent more that school year than their peers had seven years earlier and they carried an average debt load of $28,000.

The report noted that student debt loads increased across the board regardless of gender, race, ethnicity or family income, and for students at both public and private institutions.

In fact, borrowing rose higher for post-graduate students at state-supported colleges over those seven years than it did for those enrolled in private universities.

Still, a higher percentage of private-university students borrowed, and they borrowed more than those in public schools in 1999-2000.

Rising tuition over that seven-year period, of course, accounted for more students borrowing and at higher loan amounts. But that wasn’t the sole reason.

The report said the reauthorization of the Higher Education Act, which happened in the 1993-94 school year, made it easier for students to qualify for need-based aid. It also raised loan limits, and made unsubsidized loans available to those students whose family incomes were too high for them to qualify for need-based aid.

The result of that legislation, according to the report, is that more students were allowed to borrow in 1999-2000 than in 1992-93, and they were allowed to borrow larger amounts.

Whenever the U.S. Department of Education issues its next report on student debt, it is likely to show increases above the 2004 study, because interest rates on education loans have gone up since then. In July, Congress raised the fixed interest rate by 2.5 percent to 6.8 percent, and some variable-rate loans had passed 8 percent.

But following last month’s election where Democrats took control of the U.S. Senate and House, Congressman George Miller, D-California, said he plans to cut the interest rate on student loans in half to 3.4 percent next year. Miller is expected to assume the chairmanship of the House Committee on Education and the Workforce.

Miller also wants to increase the number of government loans to students because the president’s budget office found that those kinds of loans cost the government less than loans backed by private lenders. The government issues about 6.9 million student loans a year.

But outgoing chairman Congressman Howard McKeon, R-California, said the current rate is a relatively low rate and that slicing it in half would cost the government $18 billion over five years.

The Project on Student Debt, a nonprofit advocacy group, reported in 2004 that 8 percent of graduating seniors owed $40,000 or more in college loans.

Students who graduated this year can consolidate their loans and have their interest rate reduced by six-tenths of a percent, but they have to do that within six months of the day they graduated.    

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