Here is the Wall Street Journal article that provided these figures from the Department of Education. This growth was ahead of figures provided at end of February by the Department, which showed 20.8% growth in federal student loans on a year over year basis [I am still trying to reconcile the $77.3 billion that was reported in February with the $75.1 billion reported in the WSJ story. Incidentally, The College Board Trends in Student Aid for 2007-08 put the total of federal student loans at $66 billion for 2007-08. $75 billion is about a 14% increase over the College Board figures.]
As for the reasons for this increase, which Deputy Undersecretary Shireman described as "definitely above expectations:"
- Economic environment
- "The eye-opening increase in borrowing is largely due to the dire economic environment, which is causing more people to seek federal loans, he [Shireman] says."
- Increases in Stafford loan limits
- Rose from $23,000 to $31,000 for dependent undergraduates as of July 1, 2009
- Sharp reduction in private loans, which SLA estimates has dropped by $6 -$7 billion, due to major lenders retrenching as well as many leaving the business altogether
- Increase in student population driven by weak economy
- Go here for recent headlines about where they are headed
The discrepancy may have something to do with using awarded loans vs. disbursed loans. Schools award more in loans than students accept. I believe The College Board uses loans awarded and the Dept. of Ed uses loans disbursed.
Posted by: FinAid Administrator | September 03, 2009 at 02:08 PM
In FFEL, awarded is 15 to 20 percent higher than disbursed. In DL it is much closer because there are fewer middlemen involved to communicate all the changes/adjustments in attendance and attendance intensity as well as cancels.
Posted by: Craigie | September 04, 2009 at 05:09 AM
I'm not understanding this, and have been debating about it with Patricia Steele at the College Board
Posted by: Ms. C. Cryn Johannsen | September 04, 2009 at 09:34 AM
The most recent CB publication, "Trends in Student Aid 2008," indicates that CB made a radical change in how it presents the information it receives from the U.S. Department of Education:
"Stafford, PLUS, and Perkins Loans. Data provided by the Department of Education on education loan disbursements. Trends in Student Aid reports before 2007 reported instead on loan commitments, a larger number including some loans approved but never disbursed."
http://professionals.collegeboard.com/profdownload/trends-in-student-aid-2008.pdf
CB probably reached the same realization as the National Center for Education Statistics (NCES), http://nces.ed.gov/das/new/index.asp , that there is a lot of "loosey-goosey" operational practice in the FFEL program and a huge difference between gross commitments vs. net commitments -- or dollars guaranteed vs. dollars disbursed.
However, it is not clear from CB's statement whether CB has obtained disbursed dollars for only a couple years back, or back to 1997-98, or even further. Most likely CB would have to continue to use gross commitments for older years in its charts and tables, because new metrics for old years would not not be available.
It is strange that all these groups are just coming to these realizations. John B. Lee and many others in the field have long realized the significant differencesb based on how origination volumes are measured. They tend to prefer the gross amounts, because they are available much faster and also can be compared to earlier years much easier. Net for 2008 can't be compared to net for 2004. 2008 is still in flux with active adjustments and cancellations, while 2004 is experiencing far fewer adjustments and cancellations on a monthly basis. It is not clear how CB is going to be able to say that it has a net figure for 2008-09 or even 2007-08 when the "Trends" report comes out next month.
Posted by: Craigie | September 04, 2009 at 02:55 PM
Craigie - what a great post. This site had been enormously helpful for my own writing about the student lending crisis.
Your post provides me with a wealth of helpful information, too.
I'm so glad I found this site - I promote you regularly at my blog. I hope that you're getting traffic as a result.
-Cryn
Ms. C. Cryn Johannsen, Promotional Writer and Marketer, Robert Applebaum's Forgive Student Loan Debt Movement
Robert Applebaum's site: http://www.forgivestudentloandebt.com/
My blog: http://alleducationmatters.blogspot.com/
Posted by: Ms. C. Cryn Johannsen | September 06, 2009 at 12:57 PM