This study uses data from the 199293 and 19992000 National Postsecondary Student Aid Study (NPSAS:93 and NPSAS:2000). These two NPSAS surveys represent periods before and after major changes in federal financial aid policy went into effect under the 1992 reauthorization of the Higher Education Act (HEA-92). The most significant change affected the federal (Stafford) loan eligibility of dependent students (students who are considered financially dependent on their parents for purposes of financial aid eligibility). Their eligibility for need-based subsidized loans increased, and for the first time they became eligible for unsubsidized student loans. In addition to changes in federal financial aid policy, there were changes in state and institutional grant aid that must be taken into account.
The students included in this study were full-time undergraduates at public 4-year, private not-for-profit 4-year, and public 2-year institutions. For these students, the major changes in financial aid awards between 199293 and 19992000 were as follows:
- Reflecting in part expanded eligibility for federal loans as well as a response to increased tuition and fees, undergraduate borrowing increased significantly. The percentage of full-time undergraduates who relied on federal student loans to help pay for their college education increased from 30 to 43 percent overall. After adjusting for inflation, the average amount of a federal student loan also increased, from about $3,900 to $4,800. No increase in the percentage of students borrowing was detected for undergraduates in the lowest income quartileroughly half borrowed in both survey yearsbut the likelihood of borrowing increased for both middle-income undergraduates (from 32 to 45 percent) and high-income undergraduates (from 15 to 31 percent).
- There was a relatively small increase in the percentage of full-time undergraduates who were awarded state grants (from 17 to 22 percent overall). The average amount awarded increased from about $1,800 to $2,000.
- Undergraduates were much more likely to receive institutional grant aid in 19992000 than in 199293. The percentage of full-time undergraduates who were awarded institutional grant aid increased from 23 to 31 percent overall, and the average amount of aid that students received increased from about $4,200 to $4,700.
An important component of this study is to determine how these changes in financial aid awardsespecially the significant increase in borrowingare reflected in changes in net price over the same period.