NCPA - National Center for Policy Analysis


March 31, 2005

Rising tuitions, higher borrowing limits on government loans and a new wave of low-income students have pushed the average debt burden of college graduates higher as more students from all income groups borrow more to finance their undergraduate educations, says USA Today.

A study by the U.S. Education Department finds that lower interest rates and higher salaries are taking some of the bite out of borrowing more. However, researchers found an immediate and dramatic rise in the number of students borrowing money in the 1990's:

  • From 1992 to 2002, the volume of federal government loans rose 137 percent, to $20.7 billion.
  • Undergraduate students borrowed, on average, $19,300 from all sources, up from $12,100 a decade earlier and the percentage of students borrowing at least $25,000 more than tripled from 7 percent to 26 percent.

Lower interest rates and more favorable repayment plans are helping graduates, although some more than others, say researchers:

  • The overall sum borrowed by students rose by 60 percent, but monthly payments only rose 30 percent.
  • The median college loan payment for a recent graduate amounted to 6.9 percent of monthly salary, up slightly from 6.7 percent in 1994.
  • Loan payments for the highest-paid young graduate are 5 percent of their monthly earnings compared to 15.4 percent for the lowest-paid workers.

While consolidating loans and low interest rates can help students and make paying off debt more manageable, experts still express concern for the low-income students who will be the most affected.

Source: Greg Toppo, "College Graduates See Their Debt Burden Increase," USA Today, March 27, 2005.

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For U.S. Department of Education study:


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