Federal Student Loans:

Patterns in Tuition, Enrollment, and Federal Stafford Loan Borrowing Up to the 2007-08 Loan Limit Increase

GAO-11-470R: Published: May 25, 2011. Publicly Released: May 25, 2011.

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Although a postsecondary education is vitally important to many individuals and the nation's ability to compete globally, high college tuition rates are prompting concerns that it may remain an elusive goal for some. To help students finance their education, Congress recently raised the ceiling on the amount individual students can borrow under the federal Stafford Loan program (referred to in legislation as "loan limits"). Congress initially did so for first- and second-year undergraduate students as well as for graduate and professional students in academic year (AY) 2007-08, and subsequently for all qualified undergraduate students receiving unsubsidized Stafford loans in AY 2008-09. The Ensuring Continued Access to Student Loans Act of 2008 directed GAO to assess the impact of these increases in the loan limits on tuition and other expenses and borrowing. Since information was available only on the first loan limit increase, we focused on the AY 2007-08 loan limit increase, framing our study with three key questions: (1) What are the patterns in prices and undergraduate enrollment at institutions of higher education since the AY 2007-08 loan limit increases took effect? (2) To what extent did undergraduate students borrow Stafford loans at their maximum levels in AY 2007-08? (3) What are the characteristics of students in AY 2007-08 who borrowed more than the prior loan limits?

In summary, we found that: (1) After the change to the Stafford loan limits beginning in AY 2007-08, the price and the numbers of undergraduate students enrolling in the nation's institutions of higher education increased at a rate generally consistent with prior years. This pattern was consistent across most institutional sectors. (2) In terms of students borrowing Stafford loans, between AY 2003-04 and AY 2007-08, there was a decline in the proportion of eligible borrowers who borrowed their maximum--an amount that varies based on students' financial and personal circumstances, but is ultimately statutorily capped. These declines in borrowing were largely driven by first- and second-year students. (3) A snapshot look at first- and second-year students in AY 2007-08 who borrowed more than they could have under the previous loan limits showed that they primarily attended college exclusively full-time, were dependent students, and were most commonly enrolled in public 4-year institutions. When we compared these borrowers to all other first- and second-year Stafford loan borrowers, we found similarities across many characteristics, with the exception of dependency status and institutional sector.

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