Unmanageable debt rises: study shows unmanageable debt burden growing; low-income and minority students bear the brunt. (Financial Aid Watch).

This is one of those good news, bad news stories. First, the good news: Colleges and universities serve more students today than at any time in history, providing quality education and training the leaders of tomorrow.

Now for the bad news: A growing number of those future leaders are staggering into the working world under debt loads that are alarming even financial aid lenders. And with President Bush's proposed FY 2003 budget calling for a freeze on student aid levels, the situation is unlikely to change any time soon.

A new report by the Department of Education's National Postsecondary Student Aid Study (NPSAS) reveals that 39 percent of student borrowers now graduate with unmanageable levels of debt-monthly loan payments that amount to more than 8 percent of their monthly incomes before taxes (the saturation mark identified by the loan industry). The average student loan debt has nearly doubled in the eight years between 1992 and 2000, to $16,928. What's more, students from low-income families--those students most in need of financial assistance during college--were almost twice as likely as more affluent students to leave school with an unmanageable debt burden. And more than half of African-American students and Hispanic students graduated with unmanageable debt.

Report Highlights:

* 64 percent of students borrowed federal loans in 1999-2000 (the last year for which figures are available), compared to 42 percent in 1992-1993.

* 33 percent of graduates left school, in 1999-2000 with more than $20,000 in debt, compared to just 5 percent in 1992-93.

* 71 percent of students from low-income families (earning less than $20,000 a year) graduated with unmanageable debt.

* 44 percent of students from families with incomes of more than $100,000 graduated with unmanageable debt.

* 55 percent of African-American students, and 58 percent of Hispanic students graduated with unmanageable debt.

Importantly, the NPSAS report suggests that borrowing trends reflect changes in Pell Grant funding--that is, as Pell funding decreases, students must turn to other financing sources, increasing their debt burden. The Pell Grant, which only 25 few years ago covered 84 percent of tuition costs, now covers about 39 percent of costs. Between 1992-93 and 1995-96, when Pell Grant funding was cut, the average debt among low-income students grew by 44 percent, from $8,539 to $12,306. Between 1995-96 and 1999-2000 when Congress increased the Pell Grant funding, it continued to rise, but not as sharply. The average debt of a graduating student in that period was $15,287. Today, with the unprecedented increase in students who apply and qualify for the grant, the Pell program is operating in deficit.

Percentage of Student Borrowers who
Graduated with Unmanageable Debt Burden,
by Ethnicity, 1999-2000

White              37%
African American   55%
Hispanic           58%

African-American and Hispanic students are more likely to
graduate with unmanageable debt burdens.

Average Cumulative
Federal Student Loan Debt,
1992-93, 1995-96, 1999-2000

1992-93      $9,188
1995-96     $13,328
1999-2000   $16,928

The average debt has nearly doubled in the period between
1992 and 2000.

Information excerpted from "The Burden of Borrowing," released in March
2002 by The State PIRGs' Higher Education Project; analysis based on
the National Postsecondary Student Aid Study, a nationwide survey
conducted by the Department of Education's National Center for
Education Statistics. Data is based on full-time, full-year students at
four-year institutions.

Note: Table made from bar graph.