Consumer Lending

GAO unable to determine impact of Stafford loan limit increases

Education Money Student LoanA report released last week by the GAO found that an increase in student loan limits and the impact of the 2008 financial crisis will make it difficult to determine whether the Stafford loan limit increases affected the cost of college.

According to the report, college prices have been on the rise since the 2008 and 2009 Stafford loan limit increases. The number of student loan borrowers declined around the time the loan limit increases took effect, falling by more than 50 percent to reach 1.3 million for the 2011-12 academic year—compared to 2.8 million in 2007-08.

The report, which is mandated by the 2008 Ensuring Continued Access to Student Loans Act, said a number of factors will make it difficult to discern whether there is a direct relationship between an increase in college prices and Stafford loan increases.

“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,” the report said. “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.”

The report did find, however, that while college enrollment is generally sensitive to price increases, it has continued to rise during the past 10 years in all regions of the country.

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