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New NCES Report Shows Trends in Stafford Loan Borrowing

October 20, 2011

The Federal Stafford Loan program, authorized under the Higher Education Opportunity Act, is the largest source of loan-based financial assistance for American higher education students. In 2009-10, approximately 8.6 million undergraduates borrowed $56.1 billion in Stafford Loans, according to the College Board.

A new report from the National Center for Education Statistics (NCES) examines trends in the use of Stafford Loans by undergraduate students from 1989-90 to 2007-08. The report, “Borrowing at the Maximum: Undergraduate Stafford Loan Borrowers in 2007-08,” is based on data collected through NCES’s tri-annual National Postsecondary Student Aid Study.

Borrowing Increased at All Institutional Types

These data show that Stafford Loan borrowing jumped at all institutional types during the past two decades. At community colleges, for example, the percentage of students with at least one Stafford Loan doubled from 11.7 percent in 1989-90 to 23.8 percent in 2007-08, and the average amount borrowed by these students grew nearly 38 percent (adjusted for inflation). At four-year public colleges and universities, the share of students with loans increased from about 28 percent to almost 53 percent, and the average amount borrowed grew 48 percent.

However, borrowers at proprietary schools were the heaviest users of Stafford Loans. The share of these undergraduates with one or more Stafford Loans jumped from about 71 percent to nearly 92 percent, and their cumulative debt rose 59 percent.

Borrowing at the Maximum Amount

While the share of students with Stafford Loans increased steadily, the percentage who borrowed at the federally authorized maximum annual loan limit (which varies by undergraduate class level) from 51 percent of all undergraduate borrowers in 1992-93 to 41 percent in 1995-96. In this time span, the maximum loan amount for a traditional-age second-year undergraduate who were dependent upon their parents to pay at least a portion of their postsecondary expenses was raised from $2,625 to $3,500, and for third-year and higher students, the maximum increased from $4,000 to $5,500.

While the statutory maximum did increase, borrowers also cannot borrow more than their estimated financial need (determined when they apply for financial aid); one possible explanation offered by the report authors for the decline in maximum borrowing is that the students’ financial need did not increase as much as the change in the loan limit. Another possibility is that some borrowers were not aware of the higher loan limit until later during their college careers. Both of these factors appear to have lessened by 1999-2000, as the share of students borrowing the maximum in that year rose to 48 percent, and rose again to 51 percent in 2003-04. When the loan limits for first- and second-year students were raised in 2007-08, the share of all students getting the federally approved maximum loan dropped again to 43 percent.

The full report is available at no charge from the NCES Web site.

Contact

Ken Redd
Director, Research and Policy Analysis
202.861.2527
E-mail