US: Wealthy students borrow more frequently and in larger sums

College students from wealthier families borrow the largest sums of money at the most frequent rate in the US today, a new study has found.

A reversal from the mid-1990s, these students – defined as those from families making more than US$114,000 a year – have nearly identical borrowing rates (around 30 percent) to all other income groups, according to the report by the American Enterprise Institute, a conservative think tank.

Student loan debt by students from high-income families make up a “disproportionately large share of the total amount borrowed,” said the study’s author, Jason Delisle.

The findings shed light on borrowing trends that are less highlighted in the debates around the country’s student debt crisis, which now stands at US$1.5 trillion.

A graduating student wears a money lei, a necklace made of US dollar bills, at the Pasadena City College graduation ceremony, June 14, 2019, in Pasadena, California. Source: AFP/Robyn Beck

According to the report, the number of students from higher-income families taking out loans to get a Bachelor’s degree has grown from 30 percent in the mid-1990s to 60 percent today. Students from low-income families still take out more loans – over 75 percent borrow funds to cover their studies – but the numbers doing so have remained consistent since the 1990s.

In terms of amount, the average amount borrowed by first-year undergraduates from high-income famlilies rose from US$7,833 in 1995-96 to US$12,012 in 2015-16.

“Students from the two lowest income groups borrowed about US$2,000 more for a year of higher education in 2015/16 than they did in the mid-1990s, after adjusting for inflation. Students in the highest income group borrowed US$4,000 more,” notes the report.

Delisle, who is resident fellow at AEI, working in higher education financing, told Marketplace: “I think the impression one gets, listening to the reports about student debt, the student debt crisis and how much students are borrowing, is that this is really hitting low-income families the hardest. Meaning that college is getting expensive, and so lower-income families are turning more and more to student debt to pay for it.

“Actually, the really big changes in student debt are happening in the upper-middle class and high-income families.”

Students from low-income families still borrow at higher rates, but the study’s findings reveal that the issue of affordability in US higher education is one that cuts across income groups.

Persis Yu, Director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said: “Low-income students have historically always been relying heavily on student loan debt, so to a certain extent, there’s only so much that that number could have grown over the last 20 years.

“What I think we’re looking at now is, because tuition costs have grown so much, that now no family can afford a college education without student loan debt.”

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