pic by flickr user Jon Parise (cc license)

Do increases in federal student loan limits cause college price increases? Over the past few decades, it’s not been hard to find people who would, with or without substantiating evidence, happily make that argument. Well, this week the Government Accountability Office released a report that aimed to find an answer.

Looking specifically at the provisions of the Access to Student Loans Act of 2008, the GAO investigated for connections between student loan limits and college price increases. The results were… inconclusive.

The recession, its many economics effect and the associated decrease in employment levels, as well as increases in multiple types of student aid make the impact of Stafford loan increases on college prices almost impossible to measure. In the GAO’s own words:

For more than a decade, college prices have been rising consistently and have continued to rise at a gradual pace after the Stafford loan limit increases were enacted in 2008 and 2009. However, it is difficult to determine if a direct relationship exists between increases in college prices and the Stafford loan limit increases because of the confluence of many other factors that occurred around the time the loan limit increases took effect. Specifically, when the loan limit increases took effect, the nation was in a recession, which created one of the most tumultuous and complex economic environments in recent history. GAO’s analysis found that the economic effects of the recession, which affected families’ employment, income, and net worth make it difficult to isolate the impact the recession had on students’ decisions to borrow money to finance college expenses versus the impact of the loan limit increases. Further, federal, state, and institutional aid available to students also increased significantly around the same time the loan limit increases went into effect. It is difficult to determine the extent to which the increased availability of this financial aid influenced the decisions of students on whether and how much money they should borrow versus the availability of increased loan limits. Conversely, GAO’s analysis shows that even though college prices continued to increase at a gradual pace over the last decade as well as after the loan limits increased, enrollment, which can be sensitive to price increases, also generally continued to grow across both public and private institutions and in all regions of the country.

One thing that the GAO was able to note, however, was that the increase in Stafford loan levels coincided with a significant decrease in private student lending. This can not only be attributed to the increase in loan levels, as it was also affected by tightened lending criteria during the recession, new congressional protections and disclosures for students loans, and colleges increasing their efforts to help students find alternatives to private borrowing.

The full report can be read on the GAO website.

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