New GAO Report – Federal Student Loans

by Sabrina I. Pacifici on February 18, 2014

FEDERAL STUDENT LOANS: Impact of Loan Limit Increases on College Prices Is Difficult to Discern, GAO-14-7:  Published: Feb 18, 2014. Publicly Released: Feb 18, 2014.

“For more than a decade, college prices have been rising consistently and have continued to rise at a gradual pace after the Stafford loan limit increases were enacted in 2008 and 2009. However, it is difficult to determine if a direct relationship exists between increases in college prices and the Stafford loan limit increases because of the confluence of many other factors that occurred around the time the loan limit increases took effect. Specifically, when the loan limit increases took effect, the nation was in a recession, which created one of the most tumultuous and complex economic environments in recent history. GAO’s analysis found that the economic effects of the recession, which affected families’ employment, income, and net worth make it difficult to isolate the impact the recession had on students’ decisions to borrow money to finance college expenses versus the impact of the loan limit increases. Further, federal, state, and institutional aid available to students also increased significantly around the same time the loan limit increases went into effect. It is difficult to determine the extent to which the increased availability of this financial aid influenced the decisions of students on whether and how much money they should borrow versus the availability of increased loan limits. Conversely, GAO’s analysis shows that even though college prices continued to increase at a gradual pace over the last decade as well as after the loan limits increased, enrollment, which can be sensitive to price increases, also generally continued to grow across both public and private institutions and in all regions of the country.”

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