Department

Economics

Publication Year

2008

Abstract

For the class of 2004 the average amount of debt was $19,200. This paper seeks to explain why students are carrying so much more debt than they have in the past and whether or not students are taking out burdensome amounts of debt. The main findings of this paper are that students are taking out more loans because college price has risen faster than grants. And that the decrease in grant aid is due to the government shifting away from providing mostly grant aid to mostly loan aid. The other main finding of this paper is that although students are taking out larger amounts of debt, they are generally not burdened by it after graduation. Section one of the paper introduces the topic of student aid and explains why people borrow. Section two explains the history of student aid. Section three evaluates how college affordability has changed over time. Section four is an empirical analysis of how college price, family income, grants, and the wage ratio of high school to college graduates affects student loans. And section five concludes the results and makes recommendations.

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