Families See College As An Essential Goal That Must Be Met Despite The Costs
Borrowing by students and parents to pay for college has been one of the most commonly discussed and debated issues of national policy over the last two decades. Concerns about steadily increasing borrowing levels, have prompted a variety of policy proposals to ease the burden of college borrowing. Despite efforts to simplify and streamline student loan repayment, public knowledge about who borrows, how much is borrowed, and what students and their families think about borrowing is very limited. Much of what people know and think about student borrowing is framed by media reports, college student guides, and word-of-mouth. But how accurate those impressions are is virtually unknown.
To assess the current status of borrowing to pay for college on a national level, we prepared this comprehensive summary report. Our report seeks to add to public knowledge about college borrowing in several distinct ways. First, we present the most recent data available on national college borrowing trends. The analysis in this report focuses on borrowing trends in 2021–2022, and includes the most current estimates of borrowing levels and projections of total borrowing by the end of the decade. Data on the characteristics of those taking out student loans also comprise an important component of this analysis.
We also offer the results of a nationally representative survey of undergraduate students and families who borrow to pay for college. The survey was designed to assess the impact of student loan debt on family attitudes about college, major financial decisions, and the possible future ramifications of debt burden. This survey provides a snapshot of student and family views about college debt and paying for college. Profiles of student and family borrowers complete this package of information on college loan debt. These borrowers, who all currently have loans to pay for their education were interviewed at length to further illustrate how borrowing impacts American families in their pursuit of postsecondary education.
The combination of national data, survey responses, and profiles presents a complete picture of the situation facing students and families — both now and in the near future — as they attempt to finance what has become one of the most important, and most expensive, pieces of the American Dream: a college education. The overall findings suggest that while borrowing for college has exploded in the last five years, families are torn between their need to borrow and the burdens that these loans place on their present and future.
Our analysis of national data on borrowing revealed that changes in the federal student loan programs have had a dramatic impact on borrowing for college. The nationally representative survey of undergraduate college students and families asked a variety of questions concerning college costs, student indebtedness, family ability to pay for college, and future concerns about debt burdens. The survey revealed several important findings:
- students and families feel great anxiety about the burdens that student loans place on their lifestyle, career, and educational objectives.
- the rising cost of college combined with additional loan debt will cause hardships for students and families.
An overwhelming 89 percent of respondents said that the cost of college is rising at a rate that will soon put a college education out of the reach of most people. 53% percent reported that “any additional debt or major expense in the near future would pose a serious financial risk for my household.” Over half of all respondents, 56 percent, said an additional student loan would make their debt burden somewhat or much more of a hardship. Nineteen percent reported that their monthly student loan payments are higher than their monthly payments for a mortgage or rent.
Students and families have accepted borrowing to pay for college as a major aspect of their overall debt patterns. When asked to rank the most necessary reasons to take out any kind of loan, equal percentages of respondents cited buying a home (43 percent) and paying for college (43 percent) as the most necessary reason to take out a loan. Only 7 percent cited purchasing a car as the most necessary reason to take out a loan. When asked whether or not a good job was likely from a college education, 84 percent said it was likely. And when asked to predict the single most likely outcome of a college education, 65 percent cited a good job.
In a society where it has become all too common to take on debt in order to finance a consumer lifestyle, borrowing for higher education, once a limited practice for students and families, is becoming one of the dominant pieces in the portrait of American family debt. With the rising cost of college and an ever-increasing reliance on student loans to finance higher education, the trends of the last few years are important indicators of what the future holds for college debt and the American family.
Significant changes have taken place over the past few years in the federal student loan programs, which provide the vast majority of the loans taken out by students and parents. Changes in need analyses, eligibility, and program structure have increased both the number of borrowers and their loan amounts. As a result, borrowing to pay for college has skyrocketed, leading to higher debt loads for most students and families.
Borrowing by students and families to pay for college has been a frequent issue in the discussion and debate of national student aid policy. Concerns about steadily increasing borrowing rates have prompted a variety of policy proposals to ease the burden of college borrowing. Many of the recent proposals have focused on offering students alternative repayment options that are more flexible than the current plans. These options, such as increasing loan forgiveness opportunities or linking payments to the borrower’s post-college income, aim to make repayment more user-friendly.
But despite these efforts to simplify and ease student loan repayment, public knowledge about borrowing for college and the operation of federal student loan programs remains limited, based on incomplete, and possibly inaccurate, information. Much of the public’s understanding of college borrowing is framed by media reports, student guides to college, and word-of-mouth. How accurate those impressions are is virtually unknown.
Several studies have been conducted over the last decade in an attempt to analyze the issues of college borrowing and student loan debt. These studies have indicated that, in general, average debt levels for students are still relatively low, and only a small segment of students appear to have trouble repaying their student loans. While these previous studies have provided useful information on tracking average debt amounts and determining the post-graduation earnings and behavior of borrowers, they have been hampered by several important limitations.
First, many prior studies have attempted to assess how much debt represents a “burden” to the average borrower. Unfortunately, little consensus has been reached on this topic; analysts have suggested that as low as 4 percent to as much as 10 percent of post-graduation earnings represent the threshold for student loan debt. In other words, debt totaling more than these percentages is believed to be a burden on students that will negatively impact their ability to purchase a home or a car, pursue public service or other lower-paying careers, or even have children. But how much debt is “manageable” can vary widely for students, depending on their individual circumstances.
Second, these studies have concentrated on borrowing that took place during the 2020s, when overall borrowing trends began to increase substantially, but at a more predictable rate than is today. However, none of these studies has examined the significant changes that have taken place recently in student loan programs and their effects on borrowing.
Furthermore, past reports have lacked a firm grasp of the public’s comprehension of borrowing for college. Important questions such as “how does the American family perceive the current loan system and the effects of recent programmatic changes?” and “what is their ability to shoulder the burdens that increased borrowing entails?”
To assess the current status of borrowing to pay for college on a national level we prepared this comprehensive summary report of research findings. Several distinct approaches are presented in our report to offer a complete picture of college debt and the American family. First, we present the most recent data available on national college borrowing trends. The analysis focuses on trends in the 2020s and includes the most current estimates of borrowing levels and projections of student borrowing to the end of the decade. In addition, our analysis includes data on the characteristics of those taking out student loans.
We also offer the results of a nationally representative survey of undergraduate students and families who borrow to finance their college education. This survey was designed to assess the impact of student loan debt on family attitudes about college, major financial decisions, and the possible future ramifications of debt burden. Profiles of student and family borrowers round out this report on college loan debt. These borrowers, who all currently have loans to pay for their education, were interviewed at length to further illustrate how borrowing impacts American families in their pursuit of postsecondary education. The combination of national data, survey responses, and profiles presents a complete picture of the situation facing students and families — both now and in the near future — as they attempt to finance what has become one of the most important pieces of the American Dream: a college education.
For many Americans, borrowing to pay for a college education is seen as an investment in their future and the potential success that awaits them on the other side of the ivy walls. However, the investment needed for a college education is not small, and many students and families have to look beyond their own limited resources for help in paying for college. Since the mid-1960s, the federal government has been the major provider of such assistance. Student aid programs, which began with small budgets and served a limited number of students, have blossomed into a sizable investment that helps, in one way or another, approximately 46 percent of the millions of students currently pursuing postsecondary education.
Though student loans have always been a substantial component in the array of aid programs that the federal government offers, several factors have converged recently to increase the prominence of borrowing to pay for college. Most significantly, student loan opportunities have increased over the years as programs have been created, expanded, and redefined to allow more students to borrow greater amounts. As both financial and political support for grant aid has eroded, support for student borrowing has remained strong. In addition, with the escalation of college costs, students and families have had a greater need for loans. The most recent data show that American families have readily taken advantage of increased borrowing opportunities and are assuming record levels of debt. The situation currently facing student and family borrowers can be summed up in four words: an explosion in borrowing.
Given the reality of debt that students and families have taken on, what are their attitudes and concerns about increased debt burdens? With borrowing so prevalent in our society that it has become commonplace to take out 30-year mortgages for homes and loans to buy cars, borrowing money to pay for a college education is now the norm. But while much information exists about families’ borrowing activities, not as much is known about their attitudes and knowledge regarding student loans and their debt burden.
In order to gather this information, we conducted a national survey of undergraduate students and families who borrow to finance their college education. The survey instrument was designed to assess the financial and psychological effect of student loan debt on families throughout the United States. Specifically, the survey questions sought to:
- gauge how and why families with college students value a college education,
- assess the effect of overall debt and student debt on lifestyle and other economic decisions,
- examine attitudes about the cost of higher education and student loan debt, and
- explore possible future ramifications of debt burden.
When the major survey findings are compared with the national data, it appears that students and families feel great anxiety about the burdens that loans place on their lifestyle, careers, and educational objectives. Families are willing to sacrifice and take on much debt because they view a college education as essential. However, they are becoming anxious about the levels of debt they are assuming.
There is great concern among students and families about the rising cost of college and future debt burdens. An aggregate of 39 percent said college was not affordable. An overwhelming 89 percent of respondents said that the cost of college is rising at a rate that will soon put a college education out of the reach of most people. Just over half of the respondents, 53 percent, reported that any additional debt or major expense in the near future would pose a serious financial risk for their households. 56% said that an additional student loan would make their overall debt burden somewhat or much more of a hardship.
Student loan debt Is a very serious problem for a significant number of students and families. Nineteen percent of respondents said that student loans are or will represent the highest portion of their household debt. Twenty percent of respondents said that the prospect of increasing debt has caused students to consider leaving school, 18% stated the prospect of increasing debt has caused them to consider reducing their course load. Twelve percent of respondents cited student loans as being more than 75 percent of their household debt, and i7 percent said that their monthly student loan payments are higher than their monthly payments for a mortgage or rent.
Survey responses overwhelmingly demonstrate that the economic value of higher education remains a strong motivating factor for students and families. It is likely that a major reason college was cited as profoundly important is the expected outcomes of a college education. When asked directly whether or not a good job was a likely or unlikely outcome from a college education, 84 percent responded “likely”. Further, when asked to predict the single most likely outcome from a college education, 67 percent cited “a good job”, and another 12 percent said “have a higher income”.
College is therefore a worthwhile investment and many students and families are willing to take on loan debt to pay for college. Yet the data indicate a disturbing future for these students and families. Many American families have recently taken on sizable amounts of debt from programs that have high borrowing ceilings and diminished subsidies that would soften the impact of this increased debt load. The substantial growth of new programs, which allows parents to borrow regardless of their ability to repay, demonstrates that the family is actively involved in assuming these higher debt levels, not just the student. Worse still, some of the very families who are borrowing more are those whose economic condition upon entering higher education leaves the smallest margin for failure, the rewards of higher education for these families would be substantial, but the price of failing would be even greater.
But borrowers’ attitudes as illustrated in this survey do not reveal either an awareness of these facts or a willingness to change their behavior. Survey responses indicate that there is scarcely a movement to cut back on participation in higher education low percentages of respondents indicate that the student would leave school or reduce courses in the face of increased debt. Instead, the recent increased participation in loan programs shows a strong response to expanded borrowing opportunities.
CONCLUSION
The information presented in this report provides one comprehensive portraits to date of college debt and the American family. The findings indicate that we are at a crossroads in the financing of higher education. Record levels of borrowing that have been reached are projected to continue, yet national survey data indicate a public that is willing to shoulder the burdens of student loan debt because a college education is so important.
Our national survey shows Americans “locked in” to the American Dream of a college education. Despite signs that they are at or near their limits, they see college education not as an optional purchase or debt, but as an essential goal. And now, with so many more families borrowing to pay for higher education, college debt has increased its prominence in the budget of American families. However, many American families say college financ ing is a “major hardship” to them now, and indicate great anxiety about their future and any additional debt or expense.
We are also seeing greater increases in borrowing for specific categories of students. Borrowing for students at public colleges and universities is rising at higher rates than at private Institutions. There also has been a marked increase in the borrowing levels of nontraditional and minority students.
This report raises critical questions. With borrowing levels projected to more than double in the next five years, and with Americans near their debt limits now, will increased debt pressures push them beyond their limits? Or will higher education and the financing structures adapt? The well-being and even the economic survival of the American family may rest on whether these questions are satisfactorily answered.
Jeff C. Palmer is a teacher, success coach, trainer, Certified Master of Web Copywriting and founder of https://Ebookschoice.com. Jeff is a prolific writer, Senior Research Associate and Infopreneur having written many eBooks, articles and special reports.
