Data on student aid for 2015-16 confirm that the dramatic increases in aid awarded in 2009-10 and 2010-11 were products of extreme economic circumstances, not harbingers of long-run changes in financing for postsecondary education. Both total federal education loans and federal loans per full-time equivalent (FTE) student declined for the fifth consecutive year in 2015-16. Total expenditures on federal Pell Grants peaked in 2010-11 and have declined in each year since. State grant aid has increased each year since 2011-12.
This year’s data confirm the importance of focusing not only on the financing of undergraduate education, but also on graduate education. Unlike loans to undergraduate students, both federal loans per graduate student and total graduate student federal borrowing rose in 2015-16, after a four-year decline. Graduate students have much higher average debt levels than undergraduate students and, while they have relatively low default rates, the generous availability of federal loans makes it critical to watch these patterns closely in future years.
Types Of Student Aid
In 2015-16, undergraduate students received an average of $14,460 per FTE student in financial aid, including $8,390 in grants from all sources, $4,720 in federal loans, $1,290 in education tax credits and deductions, and $60 in Federal Work-Study (FWS).
- Graduate students received an average of $27,740 per FTE student in financial aid, including $9,300 in grants, $17,460 in federal loans, $890 in tax credits and deductions, and $90 in FWS.
- Undergraduate and graduate students received a total of $240.9 billion in grants from all sources, FWS, federal loans, and federal tax credits and deductions. In addition, students borrowed about $11 billion from nonfederal sources.
- In 2015-16, loans from federal and nonfederal sources combined constituted 36% of the funds used by undergraduates to supplement student and family resources — less than in any other year over the past two decades. Grants constituted 55% of these funds — more than in any other year over these years.
- In 2015-16, loans constituted 64% of the funds used by graduate students to supplement their own resources; grants constituted 33%.
- Total federal grants to undergraduate students increased from $20.6 billion (in 2015 dollars) in 2005-06 to $41.7 billion in 2015-16, after peaking at $51.9 billion in 2010-11.
- Total federal loans to undergraduates increased by 25% between 2005-06 and 2015-16, growing by 62% over the first five years, but declining by 23% between 2010-11 and 2015-16.
- FWS and Federal Supplemental Educational Opportunity Grants (FSEOG) combined provided $1.5 billion in 2015-16 — 1% of total aid to undergraduate students.
- Federal education tax credits and deductions reach more students than subsidized and unsubsidized Direct Loans combined, and almost twice as many students as Pell Grants.
Sources Of Grant Aid
Grant aid per FTE undergraduate student increased by $750 (10%) in 2015 dollars between 2010-11 and 2015-16, after increasing by $2,390 (46%) over the preceding five years.
- Grant aid per FTE graduate student increased by $1,830 (24%) in 2015 dollars between 2010-11 and 2015-16 after increasing by $1,150 (18%) over the preceding five years.
- In 2015-16, 34% of grant aid came from the federal government, 43% from colleges and universities, 14% from employers and other private sources, and 8% from states.
- Total grant aid for postsecondary students increased by 89% between 1995-96 and 2005-06 (after adjusting for inflation) and by another 79% between 2005-06 and 2015-16, reaching a total of $125.9 billion.
- Almost all of the growth in total grant aid between 2005-06 and 2015-16 was in the first half of the decade as FTE postsecondary enrollment increased by 21%. From 2010-11 to 2015-16, enrollment declined by 6% and grant aid increased by 5%.
- Total veterans education benefits increased from $4.5 billion (in 2015 dollars) in 2005-06 to $12.1 billion in 2010-11 and to $14.3 billion in 2015-16.
- Institutional grant aid from colleges and universities grew from $29.1 billion (in 2015 dollars) in 2005-06 to $42.0 billion in 2010-11 and to $54.7 billion in 2015-16.
- Between 2008-09 and 2013-14, the increase in average institutional grant aid for first-time full-time students at private nonprofit master’s universities more than covered the increase in tuition and fees. Increases in grants covered 95% of the tuition increase at private bachelor’s and 73% at research institutions.
- Between 2008-09 and 2013-14, the increase in average institutional grant aid covered 53% of the increase in tuition and fees at public doctoral and 34% at public master’s institutions.
- States provided grant aid averaging $750 per FTE undergraduate student in 2014-15, $10 below the 2007-08 peak and an increase from $690 (in 2014 dollars) in 2011-12. State grant aid per FTE undergraduate student ranged from under $200 in 11 states to over $1,000 in 12 states.
Total Pell Grant expenditures increased from $15.5 billion (in 2015 dollars) in 2005-06 to $39.1 billion in 2010-11, but declined to $28.2 billion by 2015-16.
- The number of Pell Grant recipients declined in 2015-16 for the fourth consecutive year, but the 7.6 million recipients represented a 46% increase from 5.2 million a decade earlier.
- The percentage of undergraduates receiving Pell Grants increased from 25% in 2005-06 to 37% in 2010-11, and was 33% in 2015-16.
- In 2014-15, 27% of recipients received the maximum Pell Grant of $5,730.
- The average Pell Grant per recipient was $2,371 (in 2015 dollars) in 1995-96. It increased to $3,000 in 2005-06, peaked at $4,196 in 2010-11, and decreased to $3,724 in 2015-16.
- Despite increasing by 21% in inflation-adjusted dollars between 2006-07 and 2016-17, the maximum Pell Grant covered 70% of average public four-year tuition and fees in 2006-07, but only 60% in 2016-17. It covered 18% of average private nonprofit four-year tuition and fees in 2006-07, and 17% in 2016-17.
Distribution of Student Aid
In 2014-15, 45% of Pell Grant recipients were dependent students; three-quarters of this group came from families with incomes below $40,000.
- In 2014-15, 22% of all Pell Grant recipients were over the age of 30.
- In 2014, 24% of the savings from education tax credits and deductions went to households with adjusted gross income (AGI) between $100,000 and $180,000 and 23% went to households with AGI below $25,000.
- In 1994-95, only 13% of state grant aid for undergraduates was awarded without regard to students’ financial circumstances. By 2004-05, this percentage had risen to 27% and it was 24% in 2014-15.
- In 2014-15, 26 states considered students’ financial circumstances in allocating at least 95% of their state grant aid, but 14 states considered financial circumstances for less than half of their grants.
In 2015-16, total annual education borrowing declined for the fifth consecutive year. Students and parents borrowed $106.8 billion, down from a peak of $124.2 billion (in 2015 dollars) in 2010-11.
- Undergraduate students and parents borrowed 7% more in 2015-16 than in 2005-06, but 18% less than in 2010-11. Graduate students borrowed 40% more in 2015-16 than in 2005-06, but 6% less than in 2010-11.
- Total borrowing of federal Direct Subsidized and Unsubsidized Loans fell by 23% ($22.3 billion in 2015 dollars) between 2010-11 and 2015-16, but was still 26% ($15.1 billion) higher than in 2005-06.
- From 2010-11 to 2015-16, federal loans per FTE undergraduate declined from $5,680 (in 2015 dollars) to $4,720. Federal loans per FTE graduate student fell from $18,700 to $17,460.
- In 2015-16, 31% of undergraduate students borrowed an average of $6,610 in Direct Loans, a decline from 37% borrowing an average of $6,920 in 2010-11, but an increase from 2005-06, when 29% of undergraduates borrowed an average of $6,060.
- Total Parent PLUS Loan borrowing rose from $10 billion (in 2015 dollars) in 2005-06 to $11.6 billion in 2010-11 and to $12 billion in 2015-16.
- Borrowing through the Grad PLUS program, which has supplemented Stafford Loans for graduate students since 2006-07, increased by 17% between 2010-11 and 2015-16.
- Nonfederal education loans fell from about $20.9 billion (in 2015 dollars) in 2005-06 to $7.9 billion in 2010-11. In 2015-16, the volume of these loans was an estimated $11.0 billion.
In 2015, 38% of all borrowers with outstanding student loan debt owed less than $10,000 and 16%, including 10% of undergraduate borrowers and 43% of graduate borrowers, owed $40,000 or more.
- In 2014-15, the 61% of bachelor’s degree recipients from public and private nonprofit institutions who borrowed graduated with an average of $28,100 in debt. Debt levels grew rapidly at public four-year colleges between 2009-10 and 2014-15, but grew slowly at private nonprofit institutions.
- In 2016, 25% of borrowers in repayment on outstanding federal Direct Student Loans were enrolled in plans that limit their monthly payments to an affordable percentage of their incomes. These borrowers held 43% of outstanding loan balances.
- Undergraduates who attended selective colleges and students who borrowed for graduate school have the largest debts and the lowest default rates. Students who borrowed to attend for-profit and public two-year colleges have the smallest debts and the highest default rates.
- Average debt for borrowers entering repayment in 2013-14 with only graduate school debt was $45,890, compared to $19,650 overall.
- Among borrowers who took out loans for graduate study only, 5% defaulted within five years, compared to 28% among all borrowers.
- Twenty-four percent of federal student loan borrowers who left school without a degree or certificate and entered repayment in 2011-12 defaulted on their loans within two years. Among those who completed their programs, the default rate was 9%.
- Default rates are highest for borrowers who leave school owing less than $5,000 and decline as loan balances increase.