The Other Big Test: Why Congress Should Allow College Students to Borrow More Through Federal Aid Programs

Abstract

Student loan borrowing has increased dramatically in recent years as the cost of pursuing higher education has risen. Because family incomes and the amount that students can borrow through federal loan programs have not kept pace, more students take out private education loans, which carry worse terms and fewer repayment options, from banks and other lenders. Graduates’ debts affect their life and career decisions in socially undesirable ways, and existing loan repayment assistance and forgiveness programs intended to ameliorate the burden do not address private loans. This article proposes significant increases in the amount students can borrow through federal loan programs, reducing or eliminating the need for private loans. Properly designed, the proposal also addresses the negative effects of debt on graduates’ life and career choices.