Stafford Loans Research Articles

Does Policy Design Matter? Comparing Universal and Targeted Approaches to Encouraging College Participation

This article compares universal and targeted program designs in the federal and state programs to encourage participation in higher education. It begins by reviewing the policy design literature in political science. Then, using that literature, it compares the experiences of universally designed state policies (subsidies for low tuition) and targeted state policies (high-tuition/high-aid funding). It also compares the experience of a universally designed federal program (Pell Grants) with a targeted program (Stafford Loans). The analysis concludes that design had only a limited impact on program sustainability. However, the federal loan programs seemed more sustainable than the Pell Grant. Finally, the article notes the rise of a new design strategy, reverse targeting, evident in the state merit scholarship and federal tax credit programs. This design seems more politically popular than either of the conventional designs.

The Behavioral and Distributional Implications of Aid for College

Subsidizing the cost of education is one of the most common, and expensive, activities of governments. While primary and secondary schooling is available tuition-free in the United States, among post-secondary students the direct cost of schooling is quite heterogeneous. First, tuition prices vary widely across schools. During the 2000-2001 academic year, college tuitions varied from zero at some community colleges to over $27,000 at Ivy League institutions. Second, institutions heavily discount these sticker prices for many students, using detailed information on family finances and academic merit to engage in finely tuned price discrimination.' Third, the federal and state governments provide individual subsidies, such as the Pell Grant and low-interest Stafford loan, that are portable across institutions. The standard model of human capital clearly predicts that such cost subsidies will raise the optimal level of schooling. While the theoretical predictions are clear, it is an empirical question how much a given dollar of subsidy affects behavior. Answering this empirical question is a challenge, since eligibility for subsidies is certainly not random and, in fact, is likely to be correlated with many other determinants of schooling. As a result, estimates based on the cross-sectional correlation of aid eligibility with schooling are subject to multiple sources of bias. This paper examines work that has used quasi-experimental methodology to isolate exogenous sources of variation in schooling costs in order to determine their effect on schooling decisions.

Examining the Effects of Scholarships on Retention in a Fine Arts College

One of the challenges facing enrollment managers is developing strategies to use merit financial aid awards to maximize student retention. The purpose of this study was to examine the relationship between high school grade point average, ACT scores, Stafford loan eligibility, total scholarship award, and persistence. Merit scholarship awards were found to affect retention positively.

Is There Still a Need for Perkins Loans? Differences in the Demographic Characteristics and Income Levels of Perkins and Stafford Loan Borrowers

In recent years, some policy-makers in Washington have called for the elimination of federal funds for the Federal Perkins Loan program. Federal law requires the Perkins Loan funds to be provided to the neediest students. However, despite this provision, several Democratic and Republican presidential administrations have implied that the program is not as need based as other federal student aid programs. The Clinton Administration has said that reducing Perkins Loan contributions would allow for greater increases in federal student aid programs that are a "higher-priority" and "more strictly need-based" (U.S. Department of Education, 1994a). In the face of these criticisms, higher education leaders have fought to preserve federal funding for Perkins Loans. These advocates believe the program "provides a low-interest source of self-help assistance to very needy students" (Committee for Education Funding, 1994). The arguments for and against Perkins Loans raise some important questions for education policy analysts: Are Perkins Loans still necessary? Do financial aid administrators effectively target Perkins Loans to the most needy students? Do the characteristics of Perkins Loan borrowers differ substantially from those who receive subsidized and unsubsidized Stafford Loans? Are changes needed in the loan programs, particularly Perkins Loans, to serve students better? This paper addresses these questions by describing the recent trends in borrowing under the federal student loan programs and comparing the demographic characteristics, income levels, educational costs, and financial need levels of Perkins Loan and subsidized and unsubsidized Stafford Loan recipients. For purposes of this paper, the term "Stafford Loan" refers to student loans through both the Stafford Loan and the Direct Loan programs.

Paraprofessionals: A Resource for Tomorrow's Teachers

There is a need for highly trained professional staff, particularly paraprofessionals, in Title I schools. If paraprofessionals are spending a significant amount of time working with Title I students in a teaching environment, it is crucial that they possess the knowledge and skills sufficient to help the students achie7e-t1-:. ,,acIre high standards expected of all students. Title I funds can be used to increase the access of paraprofessionals to services for improving their skills. Paraprofessionals should be included in professional development activities. They also need career ladder programs to help them obtain the education necessary to become certified teachers. Several states and local education agencies have established projects that can be used as examples for others wishing to implement professional career ladders. Many types of federal financial aid are available as resources for paraprofessionals seeking education degrees or teaching certificates. They include Pell grants, Direct Stafford Loans and Federal Family Education Stafford Loans, campus-based programs, teacher recruitment grants, and loan forgiveness. General eligibility requirements include being a U.S. citizen, U.S. national, or U.S. permanent resident and attending school at least half-time (for certain grants) . (SM) ******************************************************************************** Reproductions supplied by EDRS are the best that can be made from the original document. ********************************************************************************

Discrimination in mortgage lending: The impact on minority defaults in the Stafford Loan program

One troubling finding of researchers analyzing the Stafford Loan program is the high incidence of default among African-Americans. Moreover, other studies have shown that blacks are often discriminated against in obtaining home mortgage loans. Typically, borrowing and repayment decisions within the sectors of the credit market are analyzed in isolation. This paper, however, links the default decision in the student loan market to borrowing expectations in the mortgage home loan market. Given that the primary cost of not repaying one's educational loan is a damaged credit record, for those students who expect to be discriminated against in the credit market following their schooling, this cost is ineffective. This paper reveals that African-American student loan borrowers have made an economically rational decision when they choose to default on their educational loans because they foresee themselves to be excluded from obtaining home mortgage loans whether they repay their student loans or not.

On rising medical student debt

Using national databases of the Association of American Medical Colleges, the authors have examined reasons for the rising indebtedness of U.S. medical students, looking across the past decade at the influence of tuition and fees (tuition-fees) alone and the total costs of attending school, the effects of the changing demographics of medical school enrollments and lengthened graduation times, the relationship between the availability of school-funded scholarships and the amount of student loan disbursements, the pattern of student financial aid, and the reliance on borrowing to cover the costs of medical education. In constant dollars, the average indebtedness of students graduating from public schools increased 59.2% between 1985 and 1995, and that for graduates of private schools increased 64.2%. The fraction of graduates bringing debt with them when they entered medical school declined from 42.1% in 1985 to 33.6% in 1995. Premedical debt as a fraction of total debt declined at public schools from 9% in 1985 to 7% in 1995, and at private schools from 7.8% in 1985 to 5.9% in 1995. For public schools, tuition-fees increased 60.1% between 1985 and 1995, and average medical school debt increased 60.9%; for private schools, tuition-fees increased 30.1% over that period, while average medical school debt increased 66.2%. On average, public school graduates accrued debt greater than their four-year tuition-fee payments, while the average debt accrued by private school graduates was less than tuition-fee amounts. In 1995, graduates of public schools had debt accumulations representing 62% of the average total cost of attendance (tuition, fees, books, supplies, equipment, and living expenses), and the indebtedness of private school graduates was 55% of the average total cost, findings suggesting that total costs were the stronger driver of the amounts borrowed. On a national scale, the influences on medical school debt of longer graduation times, the growing number of women students, greater racial-ethnic diversity, and the admission of more older students age were negligible or small. The average parental income, adjusted to constant dollars, actually increased between 1985 and 1995. For public schools, the aggregate amounts of student aid have climbed at a steeper rate than schools' tuition-fee revenues during the past decade. For public schools, tuition-fee revenues rose 66.7% between 1985 and 1995, while the amount of loans to students at public schools increased 92.7%. For private schools, tuition-fee revenues went up 36.5%, and the amount of loans to students rose 57.9% during the same period. Federal Stafford Loans represented the major financing source, increasing from 71.5% of public schools' tuition-fee revenue in 1985 to 92.2% in 1995, and from 23% of private schools' tuition-fee revenue in 1985 to 38% in 1995. Over the decade, scholarship support kept pace with tuition-fee increases at public schools, but lagged behind the increases at private schools. The recent escalation of student debt has coincided with the lifting of the federal loan borrowing limits under the Higher Education Act. In parallel, entering medical students have declared their intentions to rely more heavily on loans as a means of financing. These findings, although based on national data and trends, provide a framework for exploration of the factors affecting educational costs and financing at individual medical schools. The importance of doing so is mounting, as students may be throwing caution to the winds in the more favorable climate for borrowing, ignoring indicators of changing practice opportunities and incomes ahead.

Student Loan Defaulters Compared with Repayers: A Texas Case Study

This research compares student loan defaulters' and repayers' attitudes about vocational education in Texas. Interviews with loan recipients indicate that student loan defaults are affected by how much students are pressured to enroll in a program, their understanding of the loan program when they first sign an application, and how well their vocational education equips them to take a job. Such findings are increasingly important to policymakers, as the struggle for federal dollars increases and vocational students remain one of the largest groups of recipients and defaulters in the Federal Stafford Loan Program (formerly the Guaranteed Student Loan Program).

The Affordability of Public Higher Education: 1970–90

The paper compares changes in family income, Pell grants, Stafford loans, and state grants with changes in the average costs of public universities and two-year colleges. It concludes that both sectors of higher education became more affordable to low- and middle-income families during the 1970s. But beginning in 1980 they both became less affordable. The only exception was that two-year colleges became increasingly affordable to low-income families during both decades.

Student Loan Program: Discontent, Confessions, Perspective, and Questions

Widespread concern and complaints have mounted about the cost to the federal government of the Stafford Loan program, and specifically on increasing costs of defaults and reports of fraud and abuse in the system. Policymakers are scurrying to enact change during this Reauthorization of the Higher Education Act. Indeed, change in the Higher Education Act is a long time coming. This article will explicate the nature of our discontent with the current state of affairs, offer institutional perspectives, raise questions and key principles in the hope that amidst a highly-charged political debate, reason and common sense can find a place.

How Federal Subsidies to the Stafford Loan Program Are Distributed among Pennsylvania Borrowers

This article describes how federal expenditures for interest benefits, special allowance payments, default claims reinsurance, and administrative cost allowances are distributed among different types of over 61,000 borrowers whose loans came due for repayment during Federal Fiscal Year (FFY) 1989. Changes in factors that affect the amounts of subsidies are examined to show how federal expenditures would be reduced. Subsidy distributions are described for the in-school, grace and repayment periods by students' types of institutions attended, years enrolled, dependency statuses, and family financial circumstances.

Student Borrowers and Education Debt Burdens

This report contains the results of a survey of Stafford Loan borrowers who were scheduled to enter repayment between September 1, 1988, and June 1, 1989. Conducted in January, 1989, the survey examines the current situation facing Stafford loan borrowers as they begin repayment of their education debt.