Student Loan Debt Highest Among Middle-Income Students

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According to a new report issued by the College Board, students from families whose median annual income falls between $60,000 and $90,000 leave school owing about $35,000 in student loans, compared to students from lower-income families, who graduate with about $25,000 in student loan debt.

Students whose yearly family income exceeds $120,000 are least likely to borrow money in the form of student loans, and those high-income students who do turn to college loans borrow less than their middle- and lower-income counterparts.

Overall, students’ average debt load from student loans, regardless of family income, was about $24,000 in 2009.

More Need for Student Loans to Pay for Private Education

The annual report from the College Board, “Trends in Student Aid,” reveals that student loan borrowing among students attending private, nonprofit four-year institutions has increased slightly in the past decade. To make this comparison, the College Board used 2009 constant dollars.

The increased reliance on student loans among private school students may indicate that these students, in the midst of a recession, are experiencing more difficulty in covering private university expenses, with their families less able to contribute money to help them cover their college costs.

About two-thirds of students who attended private colleges and universities graduated with student loan debt in 2009. Comparatively, about 55 percent of students who attended public institutions graduated with debt from student loans.

Student loan debt loads among graduates of public universities were about 24 percent lower than the levels of student loan debt incurred by students who attended private institutions. The gap between private school and public school college loan debt has increased by about 11 percent in the past decade, indicating that overall costs are rising at private institutions faster than they are at public institutions.

Estimated student loan debt levels among graduating college seniors reached a peak in the 2006–07 school year and declined in the two academic years that followed. Between 2007–08 and 2008–09, graduating seniors’ average debt from student loans remained fairly constant.

These estimates of student loan debt reported by the College Board include both government-issued federal college loans and non-federal private student loans.

Tuition Costs Surge at Public Universities as States Curtail Budgets

Although students at public universities are taking on less debt from student loans than students at private schools, tuition at four-year public institutions rose at more than double the rate of tuition increases at public two-year institutions and nearly double the tuition rate at private, nonprofit institutions over the past decade.

Another emerging trend is increased college enrollment: Undergraduate enrollment increased by nearly 6.5 percent between 2008–09 and 2009–10.

One trend that may forecast future increases in graduates’ student loan debt loads is reduced state spending on higher education. According to the College Board, state spending on higher education dropped by 9 percent in 2008–09 and fell an additional 5 percent in 2009–10. Federal stimulus spending accounted for 3 percent of state spending on higher education in 2008–09 and 5 percent in 2009–10.

An Emphasis on Grants and Federal Financial Aid

Educational grants rose on average by $1,100 for undergraduate students, but borrowing in the form of federal student loans also increased by an average of $400.

The volume of private student loans — credit-based student loans issued by banks and private lenders rather than by the federal government — dropped from $11 billion in 2008–09 to about $8.5 billion in 2009–10, in part because lending limits on federal student loans were raised in 2008–09. Colleges and universities are also making additional efforts to inform students of the expanded federal student loan limits and encouraging students to maximize their federal financial aid before turning to pricier private student loans or other private consumer financing options.

Read the full report from the College Board: “Trends in Student Financial Aid 2010”