Student Loan Debt Higher Among “Wealthy” Families
- Updated: October 11, 2014
An analysis of government data performed by the non-profit Pew Research Center, 69% of new college graduates secured student loans for education. However, in the report, “The Changing Profile of Student Borrowers”, the amount typically borrowed is now over 50% greater than 20 years ago.
Researchers discovered the increased rate of borrowing over the past 20 years was more prevalent among graduates of well-to-do families than students coming from lower-income households.
Most of the increase came from graduates of households with annual earnings between $83,407 and $125,772 and for graduates with families earning above $125.772, approximately 50% had student loan debt compared to 24% in 1993. Of graduates who left college in 2012, 62% had student loan debt versus 34% from two decades ago and for those earning less than $44,431 a year, 77% owed on student loans whereas 20 years ago it was 67%.
Richard Fry, senior economist at the Pew Research Center says there are two primary reasons for the spike of student loan debt among graduates from affluent families,.
First, prior to 2007 homeowners with greater wealth could secure home equity lines of credit to pay for a child’s college education but as banks cracked down on this funding avenue, money used to finance college was dramatically reduced or eliminated. Second, policy changes led to the expansion on eligibility for federal loan programs, broadening the pool of potential borrowers.
The largest loan program offered by the Federal government is the “Direct Loan”, previously called the “Stafford Loan”. At one time, these loans were restricted to undergraduates in need of financial support but in the 1990s when the unsubsidized Stafford loan program was introduced, students gained access to federal loan money regardless of financial need.
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