More University students will be writing checks to pay off loan companies after graduation, thanks to increased eligibility for student loans and more emphasis on getting out of school in four years.
A report from the Office of Scholarships and Financial Aid shows University students are relying significantly more on loans to pay for their education than ever before.
In 1992-93, undergraduate students on the Twin Cities campus borrowed $38.5 million. Five years later, that figure increased to more than $71 million — an increase of 85 percent. Graduate student loans increased by 90 percent.
Nationally, 60 percent of the $60 billion in financial aid was comprised of loans, a 15 percent increase in 10 years.
The borrowing trends were part of a report to the Board of Regents last week. In addition to increased levels of borrowing, the report detailed significant differences in how students pay for their education.
While undergraduates rely on their parents for tuition money, graduate students tend to rely on the money they make working at the University. Professional students mainly make use of loans.
School officials attribute the increase in borrowing to changes in federal government eligibility rules. These changes made income limits more inclusive, which enabled more families to borrow money.
Peter Zetterberg, director of the Office of Planning and Analysis, said borrowing money to pay for college allows students to work fewer hours and graduate more quickly. This gets them into the work force and allows them to pay off the loans sooner, he said.
“Borrowing in order to graduate more quickly makes economic sense for (some students),” Zetterberg said.
But Vice Provost Craig Swan said the numbers might not entirely reflect an increase in overall borrowing from lenders. He suggested the increase might indicate an rise in borrowing from the federal government specifically.
“Loans are an issue that are a bit of a mixed picture,” Swan said.
Students and families might have been borrowing money from private sources and later switched to borrowing from the government, Swan said. He said University officials would have no way of knowing about those other lending sources.
But the numbers show a significant variance between funding sources by student level. Despite the increase in loans, this form of funding still comprises just more than 10 percent of funding for undergraduates. Parental contributions and student jobs continue to comprise the primary funding source for those students.
Graduate students lean on University employment and employee tuition benefits. Most graduate students teach or do research at the University, and thus can’t manage another job.
Professional students — like those in the Law School or Medical School — need to concentrate on their intensive studies, forcing them to take out more loans to pay for tuition. Many professional students are older and do not rely on their parents, yet are also consumed by course work and don’t have time for a job.
In contrast, undergraduates rely most on family or non-University employment.
“If I didn’t have my parents, I absolutely would (apply for loans),” said Kate Shannon, a senior in the College of Liberal Arts.
Shannon said her parents contribute half of her education money; she works 20 hours per week when class is in session and full time during summers to supply the other half. She added that she will likely apply for loans when she attends graduate school.
The report also shows that since 1992-93, scholarships awarded at the University have more than doubled. However, Swan said this increase is not as significant as it might seem. He said the University’s scholarship offerings compare poorly with other Big Ten institutions.
“The University is not competitive with undergraduate scholarships,” Swan said.
The report suggests that scholarship dollars must continue to increase if officials want to maintain a diverse student body.