Association for Public Policy Analysis & Management

Although graduate students make up only 16% of the post-secondary student population, they hold an estimated $400 billion of the $1 trillion in outstanding student loan debt. Given the disproportionately large fraction of student debt that is held by graduate students it is imperative that we understand the impact of policies that affect graduate student borrowing decisions.

In recent years, the set of options available to graduate students to finance their education have undergone substantial changes. Amongst these changes, the Budget Control Act of 2011 (BCA) eliminated access to Subsidized Stafford loans for students pursuing graduate degrees. Prior to 2012, graduate students with demonstrated financial need were able to procure Subsidized Stafford loans which do not accrue interest while they are still in school. The BCA effectively raised the cost of obtaining a graduate degree by restricting students' borrowing choices for graduate school.

This study will evaluate the effect of eliminating graduate student access to Subsidized Stafford loans, for students in Texas, using regression analysis. Our preliminary results show a substantial increase in the amount of Unsubsidized Stafford loans, for graduate students, after the law change. Our preliminary analysis suggests that the elimination of Subsidized Stafford Loans increased the cost of financial aid for graduate students by $1,400 over the lifetime of the loan, representing a 7% increase in the lifetime cost of attending graduate school.