Study: 50 percent borrow money for college

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America's college students are borrowing more and taking on riskier forms of debt than ever before, according to an analysis released Thursday.

“Drowning in Debt: The Emerging Student Loan Crisis,” released by an independent education policy think tank called the Education Sector, analyzed 15 years of data through the 2007-08 academic year.

The study found:

* The cost of attending a public university has doubled over the past two decades, causing previously unseen costs of higher education.
* Family income and student financial aid haven’t kept up with the increasing costs, forcing students to borrow money for their education than ever before.
* More students are finding those funds in the form of risky, unregulated, private student loans, where they pay the highest interest rates.
* Minority college students appear to be borrowing a disproproportionate share.

“If this excessive borrowing continues, the consequences for students could be catastrophic,” report authors Erin Dillon and Kevin Carey said in a statement. “President Obama’s proposed reforms to the federal student loan program are a good start to solving the crisis, but reforming state and institutional aid policies, as well as creating incentives for colleges to restrain tuition costs are essential, particularly in our current economic crisis.”

Some of the reasons for the student loan crisis, the report said, are “out-of-control tuition increases, lack of commitment to need-based financial aid, and states and universities increasingly spending scarce financial aid dollars on wealthy students.”

If these trends continue, people will have less access to higher education, they’ll have increasing rates of catastrophic loan defaults and they will have diminished life choices, the think tank said.

Some of the specific stats included in the report include:

* Borrowing has gone from being the exception for undergraduates in 1993, at only 32 percent, to the rule. As of 2008, more than 50 percent of students at public four-year universities borrowed for their education. In for-profit education, the percentage of borrowers went to 92 percent in 2008 from 53 percent in 1993.
* The average annual debt for borrowers at four-year private universities increased by 70 percent over the study period, while the average debt for students at for-profit colleges increased by 57 percent, to $9,600 a year.
* Only 5 percent of undergraduates borrowed private loans in 2003-04. In four years, the percentage grew to 14 percent.
* Between 2004 and 2008, the percentage of African American students who took out private loans tripled, giving that group higher participation levels than whites or Hispanic students.
* At private, four-year institutions in 2008, the wealthiest students received institutional grants of nearly equal size to those earned by the poorest students.

July 9, 2009
Wichita Business Journal - by Kelly Johnson