Cumulative borrowing amounts for graduating seniors are causing growing concern. As the price of attendance increases, many worry that students' loan burdens are also rising. In recent years, borrowing increases have garnered much attention but the reasons for these increases vary. In the 1999-2000 academic year, 28 percent of dependent students from families with adjusted gross income of $90,000 or more borrowed. In 2003-2004, 57 percent of students in this income group borrowed. Hence, there was a substantial increase in the number of high-income students who borrowed.
Interest rates in 1999-2000 on student loans were 6.32 percent, whereas interest rates in 2003-2004 were 2.82 percent (in-school). While some of the borrowing increases among the families earning $90,000 or more may have been to meet the rising tuition costs, some of the borrowing may have been linked to the low interest rates in 2004.
The average cumulative loan amount for graduating seniors in the U.S. was $19,200 (Figure 1). The average loan amounts do not vary across the sectors between Minnesota and the U.S. The percent who borrowed, though, is higher for Minnesota undergraduates in the public 4-year sector than their counterparts nationally (Figure 2). Nationally, approximately 66 percent of students borrowed at some point during their undergraduate study.
Figure 3 illustrates cumulative borrowing for graduating seniors in Minnesota by income level. There is no difference in the average loan amounts or the percent who borrowed by income level. The income represents both independent students' income and dependent students' parents income. The average loan amounts for the lowest and highest income categories are not available due to the small sample size.
Note, these loan amounts exclude PLUS loans borrowed by the parents. The error bars on the figures represent the 95 percent confidence interval. The confidence intervals are large for some of the estimates which is partly due to the small number of graduating seniors in the Minnesota sample.
For more information about borrowing, please refer to Undergraduate Borrowing Statistics.
Figure 1: Average Cumulative Borrowing in the U.S. and Minnesota by 4-year Sector
Figure 2: Percent of Graduating Seniors Who Borrowed in the U.S. and Minnesota by 4-year Sector
Figure 3: Average Cumulative Borrowing in Minnesota by Income