Good News: Students Borrowing Less From Education Department

The bad news is that I just updated the LSTB’s student debt data page, but revising it again is my problem, not yours.

For those in the know, the Department of Education (ED) tracks the amount of debt the government lends out each quarter (and each academic year), going back to the late 1990s. Here’s total borrowing by loan program, which includes direct loans and guaranteed loans back when they were around.

Amount of Federal Loans Disbursed

Don’t let the 2012 data throw you. Because Congress stripped subsidized Stafford loans from graduate and professional students, the 2012 bars’ meanings completely changed from previous years. Now all subsidized Stafford loan borrowers are undergraduates only, and ED kindly separated graduate unsubsidized borrowers from undergraduates. Nevertheless, the total amount of Stafford borrowing is dropping. In the 2011-12 academic year it was $85 billion; in 2012-13 it fell to $78 billion.

The declining loan volumes imply that the Office of Management and Budget’s long-term direct loan projections, which are discussed in the aforementioned student debt page) are probably high.

Projected Direct Loan Balance (OMB)

Less money lent out means fewer dollars likely to be lost to the program, so I consider this good news. However, the amount of money lent in 2012-13 is still sky high compared to the middle of the decade, and we don’t know who’s not borrowing, why they’re not borrowing, or whether their parents are just taking out dubious 410(k) loans instead.

Parent PLUS loan borrowing is down as well (-170,000 recipients), but that’s probably due to ED tightening the eligibility requirements on those loans. Grad PLUS loans are down slightly too, with about 18,000 fewer recipients. At most 2,000 of these can be attributed to law school graduates who were not replaced in the 2012-2013 academic year.

Here’s a chart of the number of recipients by loan type:

No. Federal Loan Recipients Per Year

(Note: the data point for unsubsidized undergraduate Stafford borrowers overlaps with the point for all PLUS borrowers in 2012, 6.9 million (left) and 697,000 (right), respectively.)

…And here’s the amount disbursed per recipient:

Amount Disbursed Per Recipient

Splitting graduate unsubsidized Stafford borrowers from the undergrads reveals just how much more graduate and professional students borrow. If grads and professionals go add Grad PLUS loans to their unsubsidized Staffords, they’re taking on more than $37,000 in debt in one academic year. Since there were 335,000 Grad PLUS borrowers last year, we can expect that in the near future, the highest student debt brackets (e.g. >$100,000) that we’re told aren’t really a problem will increase more quickly than the lower brackets. This much is not good news.

I’d give an update on the freestanding private law schools, but for some reason Western State didn’t appear in the data and I’m waiting for an explanation from ED.

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