Student Loan Information
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An education loan is a form of financial aid that must be repaid, with interest. (Scholarships, on the other hand, do not have to be repaid.) Education loans come in three major categories: student loans (e.g., Stafford and Perkins loans), parent loans (e.g., PLUS loans) and private student loans (also called alternative student loans). A fourth type of education loan, the consolidation loan, allows the borrower to lump all of their loans into one loan for simplified payment.
Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. Nothing prevents a lender from charging lower fees. Many lenders offer a variety of student loan discounts to attract borrowers.
Few students can afford to pay for college without some form of education financing. Two-thirds (65.7%) of 4-year undergraduate students graduate with some debt, and the average student loan debt among graduating seniors is $19,237 (excluding PLUS Loans but including Stafford, Perkins, state, college and private loans), according to the 2003-2004 National Postsecondary Student Aid Study (NPSAS). (The median is $17,120. One quarter of undergraduate students borrow $24,936 or more, and one tenth borrow $35,213 or more.) For federal student loan debt (excluding PLUS Loans), the figures are 62.2% and $17,036. Average cumulative debt increases by about 3% or approximately $550 a year. When one includes PLUS loans in the total, the average cumulative debt incurred is $21,899. (Approximately one in ten (10.8%) parents borrow PLUS loans for their children’s college education, with a cumulative PLUS loan debt of $16,317.)
The following table shows the percentage of students borrowing and average cumulative debt per borrower (excluding PLUS Loans) according to type of educational institution.
| Undergraduate Education Debt | ||
|---|---|---|
| Institution Level & Control | Percent Borrowing | Cumulative Debt |
| Overall Total (4, 2 and < 2 year) | 55.5% | $15,766 |
| 4-year Total | 65.6% | $19,202 |
| 4-year Public | 61.7% | $17,277 |
| 4-year Private Non-Profit | 72.8% | $21,957 |
| 4-year Private For-Profit | 87.3% | $28,138 |
| 2-year Total | 37.4% | $9,897 |
| 2-year Public | 33.2% | $9,387 |
| 2-year Private Non-Profit | 69.1% | $12,326 |
| 2-year Private For-Profit | 90.0% | $12,107 |
| < 2-year Total | 67.1% | $7,271 |
| < 2-year Public | 34.0% | $7,243 |
| < 2-year Private Non-Profit | 26.5% | $4,854 |
| < 2-year Private For-Profit | 77.3% | $7,311 |
Graduate and professional students borrow even more, with the additional debt for a graduate degree ranging from $27,000 to $114,000. The following table shows the percentage borrowing and average amount of cumulative debt per borrower among graduating students according to degree program. It provides the amounts borrowed for just the graduate education and also the combined totals for undergraduate and graduate education.
| Graduate Education Debt | All Education Debt (Grad & Undergrad) |
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|---|---|---|---|---|
| Graduate & Professional Degree Programs | Percent Borrowing | Cumulative Debt | Percent Borrowing | Cumulative Debt |
| Total | 60.1% | $37,067 | 70.1% | $42,406 |
| Master’s Degree | 58.4% | $26,895 | 69.3% | $32,858 |
| Doctoral Degree | 51.0% | $49,007 | 58.3% | $53,405 |
| Professional Degree | 86.5% | $82,688 | 88.4% | $93,134 |
| MBA | 53.0% | $35,525 | 63.6% | $41,687 |
| MSW | 76.5% | $27,136 | 81.0% | $37,029 |
| PhD | 40.0% | $36,917 | 46.8% | $41,540 |
| EdD | 53.4% | $49,050 | 65.7% | $47,725 |
| Law (LLB or JD) | 87.7% | $70,933 | 89.7% | $80,754 |
| Medicine | 95.0% | $113,661 | 95.0% | $125,819 |
Grants, scholarships, work-study and other forms of gift aid just do not cover the full cost of a college education. Many students find that they must supplement their savings with government and private loans. The Federal education loan programs offer lower interest rates and more flexible repayment plans than most consumer loans, making them an attractive way to finance your education. You can also deduct up to $2,500 in student loan interest even if you don’t itemize deductions on your income tax return.