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The Student Debt Dilemma: Debt Aversion as a Barrier to College Access

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  • Burdman, Pamela
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    Abstract

    Though the rise in college student debt often has been blamed on rising tuition, a radical shift in student financial aid--from a system relying primarily on need-based grants to one dominated by loans--has been equally important. Numerous reports have highlighted the burdens faced by students who borrow large sums, but less is known about students who are averse to borrowing. For these students, the increasing prominence of loans could actually narrow their options and decrease their chances of attending and completing college. Given the increasingly important role of student loans in financial aid packages, perceptions about debt influence the ability of loan programs to achieve their goal of equalizing opportunity for students at all income levels. Based on interviews with students, counselors, outreach professionals, and financial aid directors, as well as a review of relevant research, this discussion paper offers an initial gauge of the debt dilemma and recommends four broad strategies: (1) making more grant money available for low-income and first-generation students, (2) making loan programs more attractive and efficient through income-based repayment strategies, (3) better integrating financial aid awareness into high school counseling, and (4) providing more pathways for students who prefer to attend part-time. Loans are likely to remain a mainstay of federal financial aid programs, so as interest rates begin to rise for the first time in years, foreshadowing higher future payments, the problems faced by students who borrow as well as the barriers confronted by those who are averse to borrowing are only liable to increase.

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    File URL: http://www.escholarship.org/uc/item/6sp9787j.pdf;origin=repeccitec
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    Bibliographic Info

    Paper provided by Center for Studies in Higher Education, UC Berkeley in its series University of California at Berkeley, Center for Studies in Higher Education with number qt6sp9787j.

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    Date of creation: 01 Oct 2005
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    Handle: RePEc:cdl:cshedu:qt6sp9787j

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    Web page: http://www.escholarship.org/repec/cshe/

    Related research

    Keywords: Higher Education; Financial Aid; Student Loans; Debt; Access; Policy; Retention; Completion;

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    Cited by:
    1. Judith Scott-Clayton, 2012. "Information Constraints and Financial Aid Policy," NBER Working Papers 17811, National Bureau of Economic Research, Inc.
    2. Rita Asplund & Oussama Ben Adbelkarim & Ali Skalli, 2008. "An equity perspective on access to, enrolment in and finance of tertiary education," Education Economics, Taylor & Francis Journals, vol. 16(3), pages 261-274.
    3. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    4. Darragh Flannery & Cathal O’Donoghue, 2011. "The Life-cycle Impact of Alternative Higher Education Finance Systems in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 42(3), pages 237–270.

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