Two important changes during the 1990s had major implications for borrowing for undergraduate education. First, the price of going to college increased faster than inflation (The College Board 2003a). Second, the 1992 Reauthorization of the Higher Education Act increased loan limits for the Stafford loan program, expanded eligibility for need-based aid, and introduced unsubsidized Stafford loans for undergraduates regardless of their financial need. The resulting increase in federal borrowing was immediate and dramatic. After adjusting for inflation, the federal loan volume for undergraduate and graduate borrowing increased by 35 percent the first year after the change (1992–93 to 1993–94) (The College Board 2003b). Between 1992–93 and 2002–03, it grew from $20.7 billion (in constant 2002 dollars) to $49.1 billion, an increase of 137 percent.

This report uses the 1994 and 2001 Baccalaureate and Beyond Longitudinal Study (B&B) to compare the borrowing patterns of 1992–93 and 1999–2000 bachelor’s degree recipients. It also examines their repayment situations and resulting debt burdens (defined as monthly loan payments as a percentage of monthly salary income a year after they graduated). Members of the earlier cohort finished their undergraduate borrowing before the changes in the Stafford loan program were implemented, and most members of the later cohort would have done all of their borrowing under the new rules.

The major finding of the analysis was that although both the percentage of graduates who had borrowed for their undergraduate education and the average total amount borrowed (adjusting for inflation) increased, the median debt burden (as defined in the previous paragraph) a year after graduating was about the same for both cohorts. Higher salaries (after adjusting for inflation) and lower payments relative to the amount borrowed for the later cohort (whose payments were kept down by declining interest rates) appear to be the major reason why there was no increase in the later cohort’s debt burden. Various alternative payment options could have lowered the payments for some members of either cohort, but comparable data on how the two cohorts used these alternatives are not available.

The data presented in this report are nationally representative of bachelor’s degree recipients in 1992–93 and 1999–2000. They cover the 50 states, the District of Columbia, and Puerto Rico, except for the first row in each table, which excludes Puerto Rico. The comparisons made in the text were tested using the Student’s t statistic. All differences cited are statistically significant at the .05 level. The amounts borrowed by 1992–93 graduates were adjusted to 1999 constant dollars using the Consumer Price Index for all urban dwellers (CPI-U) to make them comparable to the amounts borrowed by 1999–2000 graduates; the amounts owed, monthly payments, and earnings a year later (in 1994) were adjusted to 2001 constant dollars.

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