Student Loan Data

1
Student Loan Data
NCHELP Spring Convention 2005 Naples, Florida

• Susan ChoyMPR AssociatesBerkeley, California
• schoy_at_mprinc.com

Sandy BaumProfessor of EconomicsSkidmore
College sbaum_at_collegeboard.org
2
Percent with Student LoansAll Undergraduates
1999-2000
2003-04
Percent
100
80
56
60
50
45
40
35
40
29
20
12
7
0
Total
Public 2-year
Public 4-year
Private 4-year
3
Average Amount in Student LoansAll Undergraduate
Borrowers
1999-2000
2003-04
Average amount
10,000
8,000
6,900
6,200
5,800
5,600
6,000
5,100
4,800
3,600
4,000
3,300
2,000
0
Total
Public 2-year
Public 4-year
Private 4-year
4
Percent with Student Loans, by IncomeFull-Time
Undergraduates
2003-04
1999-2000
50 46 53 49 48 48 38 57
45 45 51 49 47 42 29 49
Total Dependent students Less than
20,000 20,000-39,999 40,000-59,999 60,000-7
9,999 80,000-99,999 100,000 or
more Independent students
5
Average Amount in Student Loans, by
IncomeFull-Time Undergraduate Borrowers
2003-04
1999-2000
Change
6,200 5,200 5,400 5,700 5,700 5,800 5,800 7,50
0
5,400 4,700 4,900 4,700 4,900 5,100 5,200 6,80
0
Total Dependent students Less than
20,000 20,000-39,999 40,000-59,999 60,000-7
9,999 80,000-99,999 100,000 or
more Independent students
15 11 10 21 16 14 12 10
6
Percent with Stafford and Plus LoansFull-Time
Undergraduates in 200304
Subsidized
Any Stafford
Unsubsidized
PLUS
43 49 43 34 25 11 52
43 50 47 45 45 36 55
Dependent students Less than 20,000 20,000-39,
999 40,000-59,999 60,000-79,999 80,000-99,99
9 100,000 or more Independent students
11 14 15 23 30 29 43
4 6 8 11 12 10
7
Average Amounts in Stafford and PLUS
LoansFull-Time Undergraduate Borrowers in 200304
Subsidized
Any Stafford
Unsubsidized
PLUS
3,400 3,500 3,500 3,300 3,200 3,200 3,800
4,300 4,200 4,200 4,200 4,200 4,100 6,800
Dependent students Less than 20,000 20,000-39,
999 40,000-59,999 60,000-79,999 80,000-99,99
9 100,000 or more Independent students
3,400 3,100 3,000 3,300 3,600 3,800 4,100
7,400 7,800 7,900 8,700 9,700 11,700
8
Percent with Student LoansGraduate and
Professional Students
1999-2000
2003-04
Percent
100
78
76
80
60
41
40
31
27
22
20
0
Masters
Doctoral
Professional
9
Average Amount with Student LoansGraduate and
Professional Student Borrowers
1999-2000
2003-04
Average amount
30,000
26,400
20,000
20,000
17,800
13,600
13,200
12,400
10,000
0
Masters
Doctoral
Professional
10
For More Information
L. Berkner et al., 2003-04 National Postsecondary
Student Aid Study (NPSAS2004) Student Financial
Aid Estimates for 2004 (NCES 2005-158) Available
at http//nces.ed.gov/pubsearch/pubsinfo.asp?pubi
d2005158 L. Berkner et al., 2003-04 National
Postsecondary Aid Study (NPSAS2004)
Undergraduate Financial Aid Estimates for 2003-04
by Type of Institution (NCES 2005-163) Forthcomin
g at http//nces.ed.gov/pubsearch/pubsinfo.asp?pu
bid2005163
11
Grants vs. Loans, Percent Share of Total Aid
1993-94 to 2003-04
Source The College Board, Trends in Student Aid,
2004
12
Growth of Stafford, PLUS, and Nonfederal Loan
Dollars
in Constant (2003) Dollars, 1996-97 to 2003-04
Source The College Board, Trends in Student Aid,
2004
13
Total Student Borrowing
1995-96 2003-04, Constant 2003 Dollars
17
14
11

10
10
8
6
6
4

14
Average Aid per Full-Time Equivalent Student
1983-84 to 2003-04
15
Debt Burden
NCHELP Spring Convention 2005 Naples, Florida

• Susan ChoyMPR AssociatesBerkeley, California
• schoy_at_mprinc.com

Sandy BaumProfessor of EconomicsSkidmore
College sbaum_at_collegeboard.org
16
Important Changes in the 1990s

• Tuition and fee increases outpaced inflation and
  growth in median family income
• 1992 reauthorization of the Higher Education Act
• Expanded eligibility for student aid
• Raised loan limits
• Introduced unsubsidized loans for all students,
  regardless of need

17
Data Source
Baccalaureate and Beyond Study
National Center for Education Statistics
Followed-Up
Graduated
1994 2001
1992-93 1999-2000
18
Percentage of Bachelors Degree Recipients Who
Borrowed
Percent
100
80
65
60
49
40
20
0
1992-93
1999-2000
19
Average Amount Borrowed (Among Borrowers) (in
1999 Constant Dollars)
Amount borrowed
25,000
19,300
20,000
15,000
12,100
10,000
5,000
0
1992-93
1999-2000
20
Percentage of Bachelors Degree Recipients Who
Borrowed
Percent
100
80
72
70
67
68
62
60
60
45
46
40
34
24
20
0
Lowest
Lower middle
Upper middle
Highest
Independent
Dependent
Family Income and Dependency Status
21
Average Amount Borrowed(Among Borrowers) (in
1999 Constant Dollars)
23,300
20,100
19,100
18,900
17,800
15,300
12,700
12,700
11,500
10,800
Lowest
Lower middle
Upper middle
Highest
Independent
Dependent
Family Income and Dependency Status
22
Average Monthly Payment (2001 Constant Dollars)
Monthly payment
250
210
200
160
150
100
50
0
1994
2001
23
Average Annual Salary (in 2001 Constant Dollars)
1994
2001
Annual salary
50,000
41,600
39,700
40,000
34,100
30,400
30,400
29,600
28,300
27,300
30,000
25,300
23,500
20,000
10,000
0
Total
Education
Humanities or social sciences
Business and management
Engineering, mathematics, or science
24
Percentage Distribution of Loan Repayers by Debt
Burden
Median 6.7
Median 6.9
Percent
50
40
36
33
31
28
30
20
20
16
12
9
9
7
10
0
lt5
5-8
9-12
13-16
17
lt5
5-8
9-12
13-16
17
1994
2001
25
Graduates with Debt Burden gt12 Percent
2001
1994
27 41 24 8 100
22 45 24 9 100
Salary Lowest Lower middle Upper
middle Highest
26
Conclusions
For Bachelors degree recipients

• Borrowing has increased
• Salaries have increased
• Interest rates have declined
• Debt burden has remained about the same

27
Source
Choy, S. and Li, X., Debt Burden A Comparison of
1992-93 and 1999-2000 Bachelors Degree
Recipients a Year After Graduating (NCES
2005-170) Available through the NCES electronic
catalog http//nces.ed.gov/pubsearch/pubsinfo.asp
?pubid2005170
28
Debt Burden

• Median payment / income 7
• Not up as debt amounts increase
• No evidence of debts significantly affecting
  choices about study, careers
• (Nellie Mae, ACE)

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Low-Income Borrowers
30
Low-Income Borrowers
31
Credit Card Balances

• Median debt 946 average balances not
  increasing over time. Nellie Mae, Undergraduate
  Credit Card Usage in 2004
• Average balance 672. (Julie Cunningham, Kansas
  State, College Student Credit Card Usage, 2002)
• Half have balances less than 100. A quarter have
  balances gt 1,000. Lawrence, et al, Credit Card
  Usage of College Students, Louisiana State,
  2003).
• 37 have balances lt 500 7 have balances gt
  7,000. (Nellie Mae, 2005)

32
Payment Patterns

• 42 never carry a balance. 25 always carry a
  balance. (Julie Cunningham, Kansas State,
  College Student Credit Card Usage, 2002)
• 21 always pay off entire balance. (Nellie Mae,
  2005)
• Students more likely than others to pay in full
  each month. Staten and Barron, College Student
  Credit Card Usage, Credit Research Center,
  Georgetown University, 2002.

33
Source of Credit Cards

• Fewer than 10 receive cards on campus.
  (Cunningham, Kansas State, College Student
  Credit Card Usage, 2002)
• One-third have credit cards before college.
  Lawrence, et al, Credit Card Usage of College
  Students, Louisiana State, 2003
• One-quarter have credit cards before college.
  Nellie Mae, 2005

34
Source of Credit Cards, contd.

• Of those who have credit cards, only 6 got them
  on campus.
• 35 mail applications 29 at a bank 15 from
  parentsLyons, Credit Practices and Financial
  Education Needs of Midwest College Students,
  University of Illinois-Urbana, December 2003
• Of those who have credit cards, 18 got them on
  campus.
• 35 direct mail 26 from parentsNellie Mae,
  2005

35
Total Student Debt

• On average, credit card debt equal to about 20
  of student loan debt.
• Monthly payments for credit card debt about 1/3
  of total monthly payments.
• Adding auto and housing debt, student loan debt a
  fraction of total debt of recent graduates.
• (Source Nellie Mae)

36
What Level of Debt is Manageable?

• Common wisdom in student loan literature
• Monthly payments should not exceed 8 of total
  income
• Based on difference between maximum housing
  expenses and maximum total monthly debt payments
• Ranges of estimates from 6 to 15

37
Changes in Banking Industry

• Debt to income ratio no longer primary
  determinant of loan eligibility
• FICO scores
• Positive credit history matters most
• Very high debt levels allowed with positive
  payment histories
• Lenders concern is default not appropriate debt
  level

38
Alternative Approaches to Benchmarking

• Depends on level of income
• HUD standards 41 total debt, 29 housing ? 12
• Borrowers in repayment 17-18 breakpoint
• Need analysis Income sensitive 0-1 up to about
  16
• Spending patterns of BA recipients vs. HS
  graduates 3 early years, some college 20
  later years, B.A.
• Income contingent loans up to 20 of
  discretionary income (18 of total income)
• Wage garnishing 10 to 15 of income

39
So?

• Debt levels are increasing rapidly.
• Interest rates are rising.
• College is a good investment and the diagnosis of
  a crisis is exaggerated.
• Education debt is a relatively small piece of the
  debt picture.
• Typical students are not borrowing excessively.
• A growing number of students are at risk.

40
We need new thinking about loan policies,
access, and success in higher education.