COLLEGE LOAN PROGRAM
launching in 1957, there was some modest new federal college financing involvement, including loans for students in the STEM (science, technology, engineering, and math) disciplines. However, even in 1965, federal student loans totaled only $159.2 million, roughly $1.3 billion in today’s dollars, and a fraction of 1% of what Americans spent annually to educate the nearly 6 million Americans then attending college. By contrast, in the last decade, new loans typically have approximated $100 billion annually, and accumulated debt now exceeds $1.5 trillion, far more than borrowing for credit cards, autos, home equity loans, etc. Only home mortgage debt is larger. The Higher Education Act of 1965 led to a vastly expanded student loan program, one that, with a 1978 mega-expansion under President Jimmy Carter, led to the financial misery college students and many graduates suffer today... the best example I know of “the law of unintended consequences.” Legislation designed to improve college access for lower-income students for whom college posed a big financial obstacle has in fact led to a much higher financial burden on all college students and their families... and has actually diminished college access to low- income Americans it ostensibly was originally supposed to help. Data provided by the College Board and the Federal Reserve System shows many popular misconceptions about student borrowing for college: • A majority (56%) of federal student loan
debt is held by the 16% of borrowers owing $60,000 or more. • As of March 2020, a majority of federal borrowers owed less than $20,000. • According to pre-pandemic (2019) Federal Reserve data, the top one-third of holders of student debt had an average net worth of nearly $300,000 (excluding their student debt), far more than those borrowing less. • A majority of the large (top one-third) borrowers had a family member with at least a master’s degree. • More than one-third of borrowers fail to complete their college degree. • The popularity of new federal student loans has declined significantly, with new loans in last decade falling 27%. In the same period, nonfederal loans grew by 48%. • Default rates have historically been much higher on student loans than other forms of consumer lending. Most defaults come from those owing $10,000 or less on their loans. The Higher Education Act of 1965 led to a vastly expanded student loan program, one that, with a 1978 mega- expansion under President Jimmy Carter, led to the financial misery college students and many graduates suffer today...
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December 2020
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