One Problem We Can’t Blame on Student Loans
Increased student loan borrowing limits did not raise the price of higher education
A new report by the General Accounting Office (GAO) demonstrates that increased student loan borrowing limits did not raise the price of higher education in academic year 2007-08.
A number of factors cause colleges to raise already high prices. School officials cite the increasing costs of providing instruction (including professor’s salaries and benefits), maintaining facilities, and operating costs. Officials at public institutions report state budget cuts influencing tuition increases.
But consistent with the GAO findings, school officials typically do not cite the availability of federal student loans as a reason for increased tuitions.
Student Loan Borrowing Limits
The amount students can borrow from the government student loan programs depends in part on a student’s financial circumstances and the cost of his or her school, and there is also a limit on Stafford loan borrowing governed by federal statutory law. Those statutory limits vary according to a student’s class level and whether the student is deemed dependent or independent for purposes of financial aid.
Beginning in academic year 2007-08, Congress raised annual Stafford loan limits for first- and second-year undergraduate students. The limits were again raised beginning in academic year 2008-09. During academic year 2009-10, 35 percent of undergraduate students borrowed federal Stafford student loans, to the tune of an estimated $56.1 billion dollars.
In spite of the increased limits, a smaller percentage of students borrowed the maximum allowable amount through the Stafford student loan program between academic year 2003-04 and academic year 2007-08. Those first- and second-year students who did borrow more under the higher limits typically attended 4-year public universities full-time.
So student loans are not the root of all evil! Who knew?
