The Student Debt Dilemma
Debt Aversion as a Barrier to College Access

The stories can be startling: the Johns Hopkins University valedictorian who borrowed $101,000 to get his degree, the Boston resident with an $80,000 debt load and a $26,000-a-year job, the student with $25,000 in federal loans who was forced to drop out of school because she was $5,000 behind on her college bills.¹ A succession of news articles, research reports, and surveys highlighting the hardships confronted by students who borrow to finance their education has alerted us to an explosion in college student debt. Though loans enable millions of students to get through college, and many pay off their debt with little problem, some feel the debt itself impedes their future plans. They report waiting to buy cars, purchase homes, or have children. Others, we are told, give up their hopes of pursuing careers in public service or attending graduate school.²

Though the debt explosion has often been blamed on rising tuition, a radical makeover in financial aid has been equally important: Since the early 1980s, student financial aid has quietly transformed from a system relying primarily on need-based grants to one dominated by loans.³ As grant programs fail to match tuition increases, more students are borrowing, and they are borrowing more. Fifty-six percent more of today’s students have federal subsidized loans than students 10 years ago.⁴ Graduates with loans borrowed an average of $19,300 in 2000, 60 percent more than they did in 1993 after adjusting for inflation.⁵ 

If indebted students are the visible face of the debt crisis, the invisible faces are those who may have been lost to higher education altogether, even if they could have succeeded academically.The outcry over rising student debt may have overshadowed an equally pressing problem affecting students who do not borrow.Though the cost of not going to college is high—Americans without college degrees earn on average a million dollars less in their lifetimes than those with degrees—that cost can be less apparent to a young adult than the prospect of crushing debt.

Students who fear borrowing may not seriously consider the benefits of higher education, relegating themselves to lower-paying jobs and fewer opportunities. If they do enroll, they may pursue money-saving strategies—attending part-time, working more than 20 hours a week, and attending two-year instead of four-year institutions. While some students stand by such choices, valuing their post-graduation freedom and the job experience garnered along the way,⁶ for others such strategies can decrease their chances of finishing an academic program, at a cost to themselves and society generally.

Therein lies the real dilemma of student debt: for some students, the availability of low-interest loans widens opportunities; for others, the increasing prominence of loans could actually narrow their options and decrease their chances of attending and completing college. Given the critically important role of student loans in the current financial aid equation, some students’ and families’ perceptions about debt could interfere with loan programs’ ability to equalize opportunity for students at all income levels.

The dilemma is worth examining precisely because loans have been an effective means of leveraging federal dollars to ensure access to college for many students, and therefore are likely to remain a mainstay of federal financial aid programs. As interest rates begin to rise for the first time in years, foreshadowing higher future payments, the problems faced by students who borrow as well as the barriers confronted by those who are averse to borrowing are only liable to increase.

Though the solutions may not be immediately obvious, they clearly will rest on careful analysis of how perceptions about loans expand or narrow opportunities in a debt-dominant environment. Because much has been written about the problem of excess debt, this inquiry focuses on the less-studied problem of debt aversion and its influence on college access and success. As an initial gauge of the contours of the debt dilemma, we interviewed students, counselors, outreach workers, and aid professionals in several states and at several types of institutions.⁷ While policy responses to the debt dilemma should be informed by empirical research, it is hoped that this review will call attention to the issue and stimulate additional research and policy explorations.

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