Why Do Students Borrow So Much? Recent National Trends in Student Loan Debt (page 2)

By — Educational Resource Information Center (U.S. Department of Education)
Updated on Jul 26, 2007

The Effects of Loans on Borrowers who Receive Degrees

However, the growth in indebtedness has to be put into a larger context. For some students, borrowing could be a wise investment because it allows them to finish their educational programs and increases the odds of achieving success in employment and other areas of life. For others, borrowing might lead to financial burdens. It is commonly suggested that loan repayment obligations may cause some loan recipients to delay home and car purchases, marriage, child rearing, and other aspects of life (Baum and Saunders 1998). 

Recent information (Baum and Saunders 1998, Choy 2000, Davis 2000) shows that despite the recent increases in borrowing, loan repayment obligations represent just a small portion of most borrowers' after-college salaries. For borrowers who received bachelor's degrees in engineering from four-year public colleges and universities in 1999, monthly loan repayments accounted for just 4.4 percent of average starting salaries. For computer science majors, loan repayments represented only 4.5 percent of average wages, and among education majors, loan repayments equaled only 7 percent of starting salaries. These findings are not meant to suggest that all borrowers were able to repay their loans without hardship. Students from medical, dental, and other professional degree programs typically face debts of $100,000 or more (National Association of Student Financial Aid Administrators 1999). Another study (Davis 2000) shows that borrowers who do not finish their educational programs have a much more difficult time in repaying their loans. Students who leave higher education without obtaining a bachelor's degree often have lower incomes than degree recipients, which makes it much harder for non- completers to repay their loans. 


Federal student loan borrowing grew primarily because the maximum loan limits were increased and middle- and upper-income students became eligible for Stafford Unsubsidized Loans. However, despite the increases in cumulative debt that occurred, most undergraduate loan recipients appear to be able to repay their loans with little difficulty, as long as they complete their degree programs. However, repayment obligations are much more difficult for professional school students, who often leave their institutions with debt of $100,000 or more, and for undergraduate borrowers who do not complete degree programs. More research would provide greater insights into how indebtedness affects these students after they leave higher education. 


Baum, S. and D. Saunders. (1998). " Life After Debt: Results of the National Student Loan Survey." Journal of Student Financial Aid, 28(3) 7-23. EJ 584 134. 
Choy, S.P. (2000). Debt Burden After College. Washington, DC: U.S. Department of Education, National Center for Education Statistics Report Number 2000-188. 

College Board. (2000). Trends in College Prices. Washington, DC: The College Board. 

Davis, J.S. (2000). College Affordability: Overlooked Long-Term Trends and Recent 50-State Patterns. Indianapolis, IN: USA Group Foundation. 

King, J.E. (1999). "Crisis or Convenience: Why Are Students Borrowing More?" In Financing a College Education: How It Works, How It's Changing. Edited by J.E. King. Phoenix, AZ: American Council on Education/Oryx Press. ED 427 630 

National Association of Student Financial Aid Administrators. (1999). Financial Aid Policies and Practices at Graduate and Professional Schools: Results from the 1998 Survey of Graduate Aid Policies, Practices, and Procedures. Washington, DC: National Association of Student Financial Aid Administrators. 

Redd, K.E. (1994). The Effects of Higher Loan Limits and Need Analysis Changes on FFELP Borrowing in Pennsylvania, July to December 1992 to 1993. Harrisburg, PA: Pennsylvania Higher Education Assistance Agency. ED 369 368. 

Redd, K.E. (1999). "The Changing Characteristics of Undergraduate Borrowers." In Financing a College Education: How It Works, How It's Changing. Edited by J.E. King. Phoenix, AZ: American Council on Education/Oryx Press. ED 427 630. 

Scherschel, P.M. (1999a). Student Indebtedness: Are Borrowers Pushing the Limits? Indianapolis, IN: USA Group Foundation. 

Scherschel, P.M. (1999b). "Reality Bites: How Much Do Students Owe?" In Student Loan Debt: Problems and Prospects-Proceedings from a National Symposium. Washington, DC: The Institute for Higher Education Policy, Sallie Mae Education Institute, and The Education Resources Institute. 

Scherschel, P.M. (2000). Student Debt Levels Continue to Rise-Stafford Indebtedness: 1999 Update. Indianapolis, IN: USA Group Foundation. 

U.S. Department of Education. (1999). Federal Student Loan Programs Data Book FY 94- FY96. Washington, DC: Office of Postsecondary Education, U.S. Department of Education. 

U.S. Department of Education. (2000a). Loan Volume Update. U.S. Department of Education Web site <> 

U.S. Department of Education. (2000b). 1993 National Postsecondary Student Aid Study. Dataset. Washington, DC: National Center for Education Statistics. 

U.S. Department of Education. (2000c). 1996 National Postsecondary Student Aid Study. Dataset. Washington, DC: National Center for Education Statistic 

View Full Article
Add your own comment
DIY Worksheets
Make puzzles and printables that are educational, personal, and fun!
Matching Lists
Quickly create fun match-up worksheets using your own words.
Word Searches
Use your own word lists to create and print custom word searches.
Crossword Puzzles
Make custom crossword puzzles using your own words and clues.