Could more federal loans help students pay for their higher education?

Tatum Johnson was addicted to the sight of North Green at Clemson University shortly after setting foot on the South Carolina campus for a tour as a high school student.

The expanse of grass overlooking the amphitheater, reflection pond and library “is breathtaking,” she said. The botanical gardens were also a godsend. “I go there mainly to see the wildlife. There are a few duck ponds and a butterfly garden and lots of squirrels.

Clemson’s campus and academic reputation sealed the deal for Johnson’s enrollment, despite its higher cost compared to other public universities she was considering.

Now, it’s Clemson’s price, rather than its scenery, that is a priority for Johnson. A junior who received the full $ 6,095 per year authorized under a federal Pell Grant – for which she qualifies based on her family’s low income – she was still below what she owed about $ 6,000, and the government limits meant she was at the max of what she could borrow in federal student loans.

While much attention is paid to high student debt, a growing chorus advances the surprising argument that students should be allowed to borrow more. With limited scholarships and rising college costs, loans can be a lifeline for students who have no other way to get a degree.

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Johnson would gladly take more federal loans, but he can’t. The cap on the amount students can borrow on federal loans has not moved for more than a decade, even as the price of the tuition, housing and boarding stamp at public universities has climbed by. 30% during this period. But undergraduates can only borrow up to $ 7,500 per year and no more than $ 31,000 for all their time in college. (Students who are no longer dependent on their parents may take more.)

To make up the difference, Johnson’s parents borrowed $ 12,000 for his graduate years through the Parent PLUS program, another type of loan that is coming under scrutiny as it puts them in debt. parents.

Johnson would rather borrow more in her own name than let her parents take out loans, she said. “And I think it would help a lot of students in similar situations as well.”

The focus on debt may also discourage some students from taking on more of it, even if they have the ability to repay it through the higher incomes they can usually expect with college degrees, according to many advocates.

“I’m really worried because I think students get very nervous about borrowing. And I’m like, look, you should be more concerned about getting your degree, ”said Rachel Fishman, associate director of education policy research at New America, a Washington think tank. “Because the people who have trouble borrowing are the ones who don’t graduate. “

What is clear is that the financial assistance currently given to students is not sufficient to cover the increasing cost of college education. Aid offered to a sample of 11,000 students missed $ 12,000, on average, to cover what they would have to pay, even after factoring in all possible federal grants and loans, according to an analysis by New America. For state students at public universities, the figure was $ 8,400.

READ MORE: Billions of Pell grants go to students who don’t graduate, new data shows

Student loans could fill this gap. And unlike the private loans that many students are forced to resort to when they hit the federal limit, direct federal loans for undergraduates come with safety valves, including the ability to cap repayment based on that. that borrowers earn after college.

Many experts, including Fishman, have also called for more scholarship aid for students to avoid loans. But a massive increase in the Pell Grant, the main federal financial aid for needy students, seems unlikely. The maximum Pell grant for students has increased by only a few hundred dollars since 1978, after adjusting for inflation, according to the College Board. For decades, the value of the subsidy actually declined.

“It’s so difficult politically to expand anything that is limited to giving aid to low-income people,” Fishman said.

The National Association of Student Financial Aid Administrators (NASFAA) supports lifting the federal student loan limit. It’s a proposal the organization hopes Congress passes as lawmakers seek to re-authorize the Higher Education Act, the main body of laws covering national higher education policy. The question of whether the White House supports such a decision is open. The Trump administration released a wishlist in March that included a cap on certain types of federal loans.

Middle-class students who are not eligible for federal aid such as the Pell Grant could benefit the most from lifting the borrowing limit, said Karen McCarthy, director of policy analysis for the association. She called them “among the most vulnerable, because they do not benefit from any of these grants to help them meet their needs as well.”

As part of its proposal, NASFAA wants the limit on undergraduate student loans raised, but would rely on colleges to lend less to certain students, such as those who are part-time or pursuing university programs with a higher education. limited market value. “The details should be worked out on what needs to happen here,” McCarthy said.

Colleges would likely buy into the idea, as they are increasingly judged by the proportion of their students who default on their loans.

Another proposal from the Higher Education Loan Coalition would double the annual amount undergraduates could borrow from $ 7,500 to $ 15,000. According to this idea, a student in an associate’s degree program could borrow up to $ 30,000; students looking for a bachelor’s degree could borrow $ 75,000. To discourage over-indebtedness, the plan proposes to limit the amount that first and second year students could borrow.

Another option for students whose financial aid is less than tuition fees is to work while graduating. But research shows that this often defeats the purpose. Working more than 15 hours a week can lead to poorer academic performance, including higher dropout rates.

Johnson, who works 20 hours a week at that university’s financial aid office, said she would not be working more. “I sure could, but my grades would definitely suffer if I did.”

However, she also feels responsible for the debt her parents incurred to finance her education and plans to help them “as much as possible” once she graduates.

Fishman, of New America, is troubled that parents of Pell recipients are allowed to borrow PLUS loans. “We are seeing intergenerational debt” as more parents grapple with student debt alongside their children, she said.

Between 2007 and 2016, the share of dependent students whose parents took out these loans increased from 9% to 12% in public universities. The average loan balance increased by $ 2,300, to reach $ 12,800 during that period, according to the College Board.

Parents of students like Johnson whose low incomes qualify them for the Full Pell Amount usually can’t afford to pay anything for their children’s education. But federal lending rules say that as long as parents don’t have a negative credit history, they can borrow thousands of dollars through the PLUS program.

READ MORE: Changing specialization adds time and tuition to the already high cost of university

An article written by Fishman argues that, among other things, parents this poor should not be allowed to borrow PLUS loans. Instead, he said, their children should be allowed to withdraw up to $ 12,500 per year – the same amount as independent students who are not dependent on their parents.

Isabelle Maraschi’s parents couldn’t even qualify for the relatively low conditions to get a PLUS loan.

Isabelle Maraschi with her brother, Fabio Maraschi, and mother, Celia Maraschi, during her graduation ceremony from Malden High School in Malden, Massachusetts, in 2018. Photo by Caio Barbosa

While the federal Pell grant and state aid contributed $ 8,100 towards his spring semester tuition, the first generation who grew up speaking Portuguese still owed the University of the United States over $ 7,600. Massachusetts to Amherst, where she is studying biochemistry.

Her mother, a cleaning lady who immigrated from Brazil 24 years ago, helps out when needed.

Instead of the PLUS loans, Maraschi took advantage of an outside scholarship in addition to work-study and federal loans that she was allowed to take out. But that scholarship runs out in her freshman year, leaving her with anxiety about how she will find the money to stay in school after that.

One plan is to work more in the summer. Another is to compete for a job as a resident assistant on campus, along with low cost housing. But although the debt scares Maraschi, she would be happy to have the opportunity to borrow more. “I can count on loans,” she said. Searching for scholarships and jobs means “you don’t know if you got it or if you got the highest amount”.

Getting more loan dollars would give her more time to study and have a better sleep schedule.

More broadly, Maraschi assumes that she would be “just a happier student.”

This story on student debt was produced by The Hechinger Report, an independent, nonprofit news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.

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