Association for Public Policy Analysis & Management

The percentage of students taking advantage of student loans has been constantly climbing (Digest of Education Statistics 2013, Tables 331.90 and 331.20, among others). Not only the sheer number of students, but the average dollar amount of loans each student claimed in ten years between 02-03 and 12-13 academic years increased by about 40% in constant dollars (and almost doubled in nominal terms). Both undergraduate and graduate students attending any kinds of institutions (two-year and four-year, public, private for-profit, and not-for profit institutions) are taking more loans and higher amount of loans. In this paper we analyze the reasons behind such increase in student debt. We study if the climb in debt was driven by reduction in scholarships, increased price of education, better college access for lower income students, recession, or anything else.

We include three latest waves of the restricted use repeated cross sectional data from the National Postsecondary Student Aid Study (NPSAS). Three waves cover the periods before (03-04 wave), during (07-08 wave), and after (11-12 wave) the Great Recession. NPSAS includes comprehensive information about students’ finances, aid received, institutions attended, students' demographics, and others. NPSAS combines data from student interviews and administrative sources, including the National Student Loan Data System. The data allows us not only to consider the students’ (and parents’) debt burden in general, but study the shift in the preferences between different types of loans (subsidized and unsubsidized Stafford loans, parent and graduate PLUS loans, Perkins loans, and other smaller loans’ programs).