Trend of Federal Funding for Loans versus Grant
- There is a growing
imbalance between authorizing additional loan eligibility and
funding grant aid. Aid packages reflect this imbalance, thereby
increasing substantially total debt upon graduation.
The federal government provides
over 70% direct aid to college students, almost 60% of this
Over the past decade total aid
has increased approximately 80% in constant dollars. The loan
programs were responsible for almost two-thirds of this increase.
- The increase in loan funding
can be contributed in part to the increased eligibility to
borrow under the Federal Stafford Loan program with raised
loan limits and creation of the unsubsidized version of the
program in 1992. In addition, the Federal Perkins Loan program
increased its loan limits when the Higher Education Act of
1965 was amended in 1998.
The increased reliance on the
loan programs from a population that was not intended to borrow.
The low-income disadvantaged student is increasingly relying
on loan programs to bridge the gap between the increased cost
and the decreased value of federal grant programs.
The lost purchasing power of
the Federal Pell Grant.
- In the late 1970s the maximum
Federal Pell Grant covered three-quarters of the average cost
of a public four-year college and one-third cost of a private
four-year institution. Today the maximum Federal Pell Grant
covers only one-third the average cost of attending a public
four-year college and one-seventh the cost of a private four-year