A new study by the Pew Research Center has revealed that the increase in student loan borrowing over the past 20 years has been significantly greater for students from more affluent backgrounds versus those from low-income families.
Even so, a rise in borrowing is evident among all socioeconomic classes.
Pew’s findings are based on information gathered in the National Postsecondary Student Aid Study. Information for that study was collected by the National Center for Education Statistics involving undergraduates enrolled in classes at any time between July 1, 2011, and June 30, 2012.
Analysis is focused on new bachelor’s degree earners or undergraduates who earned their degrees during the survey year. The study is designed to cast light on how students and families pay for higher education with a focus on federal student aid programs.
Student loan financing broke a record in 2012 when an estimated 69% of graduates had used loans to finance their education. The total amount borrowed more than doubled from that of college graduates of just 20 years ago.
Pew’s study found that half of the 2012 graduates from high-income families borrowed money for education. That’s double the amount from 1992-93.
Students from upper-middle class families have also seen their borrowing rates increase. An estimated 62% of 2012 graduates from this socioeconomic class graduated with debt. Twenty years ago the number was 34%.
College students from low-income families saw their borrowing rates rise over the last 20 years, as well. The rate climbed from 67% to 77% over the two-decade period.
Students from low-income families were also more likely to graduate with debt with an estimated 77% of graduates having loan debt compare to 50% of their wealthier classmates.
As student debt rates rise among all economic classes, analysts are trying to pinpoint the reasons behind the growth. While college tuition inflation is a possible cause, a lack of consistent historical data on total amounts of tuition paid after discounts and student financial aid makes determining a net price problematic.
Some researchers have found that aid, such as grants, discounts and tax credits, have kept pace with tuition increases, meaning the rise in the net cost of college has been modest for families facing the bottom line.
The rise of educational attainment and a greater number of students pursuing graduate degrees could play a role. More students overall are opting for college degrees to launch their careers, as pointed out by a White House report on Millennials. Among this generation’s adults some 61% have attended college versus 46% of Baby Boomers.
Since the salary gap between college-educated employees and those without a degree is larger than ever, getting a degree has become more important to help with long-term financial success.
Students should work with their financial aid department to come up with the right plan for getting a degree without incurring unnecessary debt.
