Direct Student Loans in the Changing Landscape
of Higher Education Finance

Introduction

Large numbers of today's students would not be in college at all if they had to depend on just one source of financing--on their own resources, or on their parents', or on the funds of institutions, or on public subsidies, including student aid. In this sense, all of these parties are indispensable partners in the financing of post secondary education as we know it.

Any significant change in the terms on which any of the parties participates therefore raises the question: How are the other parties likely to react? The Direct Loan Program is such a significant change. Students, routinely offered new repayment options, are likely to see their role in financing as more manageable. Colleges and universities, as originators of loans, are likely to see the inclusion of a student loan in an individual aid package (and its amount) as a matter of institutional policy amenable to fine tuning.

But how are parents, traditionally the first recourse in paying for college, likely to react? How large a role will they be willing to play? Will they expect their offspring and Federal and state governments to do relatively more or less? The environment in which all of the Federal student aid programs are funded and administered.

This essay suggests that the crucial factor influencing parental attitudes is likely to be how good an investment higher education is perceived to be--the outlays involved in making that investment weighed against the returns it is expected to produce.

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