Report: Wealthy College Students Borrow More Money for Education

An employee at a money changer counts USD 100 bills in Manila on October 25, 2012. AFP PHOTO/NOEL CELIS
AFP PHOTO/NOEL CELIS

A recent study found that college students from high-income households are borrowing more money for school than students from households with lower incomes. The report added that students from wealthier families are responsible for some of the more drastic borrowing increases in recent years.

A new report discovered that students from wealthy households borrowed larger amounts of money — and more frequently — in recent years, which have risen higher than the increase of borrowing among students from less well-off households, according to a report by Inside Higher Ed.

The report added that between 1995 and 1996, just 16 percent of first-year college students from households making an inflation-adjusted income of more than $114,000 took out student loans, with 24.3 percent of students from households making $22,000 or less taking out loans.

Between 2015 and 2016, the student loan borrowing rates jumped to about 30 percent — for all income groups. According to the American Enterprise Institute (AEI), the borrowing amounts had risen faster for students from high-income households.

Jason Delisle, a resident fellow at AEI and author of the report, noted that students from high-income households have student loan debt making up a “disproportionately large share of the total amount borrowed,” according to Inside Higher Ed.

The data examined in the AEI report does not include debt incurred by students who never completed their degrees.

The report added that the increase in borrowing is in part due to what students from high-income families choose to study, and in which institutions they enroll — noting that these students are more likely to enroll in four-year degree programs, and at pricey private institutions.

As for students from low-income families, the report said that they are more likely to enroll in shorter programs resulting in certificates or associate’s degrees, and at public institutions, which are less costly.

Moreover, it was mentioned that average net tuition and fees for high-income students have gone up by $4,400 between 1995-1996, and 2015-2016, which is roughly twice as much as the increase for other income groups.

“They’re paying more for tuition,” said Delisle. “The other thing, for the universities, is that price discrimination is getting more intense. They’re charging those students more with high sticker prices and pushing some of the aid down to lower-income students.”

Sandy Baum, a nonresident senior fellow at the Urban Institute, suggested that another reason for the increase in borrowing could be that student loans might have gotten easier to obtain than other types of debt.

“It is reasonable to believe that at least some of the increase in this borrowing is the result of the increased difficulty of obtaining home equity loans,” wrote Baum to Inside Higher Ed in an email. “We don’t have the data to verify this, but that phenomenon could explain some of the increase in borrowing among students from more affluent households.”

“It is clear that people who stay in school longer borrow more than others,” she added, “and students from more affluent backgrounds are more likely to stay in school to earn bachelor’s degrees.”

You can follow Alana Mastrangelo on Twitter at @ARmastrangelo, and on Instagram.

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