Originally created 06/03/04

More families bank on loans to pay for college



WASHINGTON -- With college expenses on the rise and grants not keeping pace, loans have turned into a financial aid of choice among families, including wealthier ones.

About half of all students from families considered lower- and middle-income took out college loans in 2000; 35 percent of students from higher income families opted to borrow.

On average, those numbers have climbed since 1990, according to an analysis released Tuesday by the National Center for Education Statistics. The share of full-time college students who borrowed to pay for college rose from 30 percent in 1990 to 45 percent in 2000.

In the study, the lowest income families made an average of $18,800 per year. The highest income families made an average of $124,600.

The greater reliance on loans is due to higher costs - from tuition to student living expenses - and changes that made it easier for students to secure loans.

The study focused only on full-time students considered financially dependent on their parents. Full-time students account for about half of four-year public school enrollment.

College grants - which, unlike loans, do not have to be repaid - also increased over the decade. But the grants were not enough to cover jumps in tuition and fees, which outpaced rises in inflation and family income during the period.

So, to make up the difference, more people relied on loans.

"Students are left with a lot of undergraduate debt, which is the price that's being paid," said Susan Choy of MPR Associates, who wrote the financial aid analysis.

The average loan in 2000 ranged from $5,200 for low-income students to $7,400 for high-income students, covering different types of public and private colleges and universities.

At four-year public schools, the average loan was $5,300, up from $3,300 in 1990.

The popularity of loans is tied in part to changes in federal law that raised loan limits and opened unsubsidized federal loans to all students, regardless of financial need.

Meanwhile, the greater availability of grants has gotten lost in the public discussion about college aid, said Sandy Baum, a policy analyst for the College Board.

"The misperception that grant aid is declining can really have a chilling effect on (college) access," Baum said. "Students' expectations and aspirations are affected by what they think is out there, in terms of aid."

But, she added, it's not a good sign that the higher-income students saw the biggest jump in receiving grant aid. Some of it was merit aid based on student grades, not financial need.

After grants and loans, the net price to students for all college expenses at public four-year colleges remained the same from 1990 to 2000: $8,000. But it took more loans to make that happen, and after-college debt has become a growing concern.

The report found that, on average, students from the higher-income families had enough to pay for college, while poorer ones still paid more than their expected share under federal standards.

The hope is that financial aid will keep rising so "tuition doesn't outpace us at rates that just make it impossible for people to go to college," said Sally Stroup, assistant secretary for postsecondary education.

The college aid report is part of The Condition of Education 2004, an annual progress report on student achievement gains, dropout rates, school choice and many other measures.

On the Net:

Education Department report: http://nces.ed.gov/programs/coe/2004/analysis/