60p. - ericdocument resume ed 430 443 he 032 033 author scherschel, patricia m. title student...

DOCUMENT RESUME

ED 430 443 HE 032 033

AUTHOR Scherschel, Patricia M.TITLE Student Indebtedness: Are Borrowers Pushing the Limits? New

Agenda Series. Volume 1, Number 2.SPONS AGENCY Association of American Colleges and Universities,

Washington, DC. Program on the Status and Education ofWomen.

PUB DATE 1998-11-00NOTE 60p.

AVAILABLE FROM USA Group Foundation, P.O. Box 7039, Indianapolis, IN46207-7039; Tel: 317-951-5755; Fax: 317-951-5063.

PUB TYPE Numerical/Quantitative Data (110) Reports Evaluative

(142)

EDRS PRICE MF01/PC03 Plus Postage.DESCRIPTORS Educational Economics; Graduate Study; *Loan Default; *Loan

Repayment; Paying for College; Postsecondary Education;Professional Education; Proprietary Schools; *Student LoanPrograms; Tables (Data); Undergraduate Study

IDENTIFIERS *Family Education Loan Program; *Stafford Student LoanProgram

ABSTRACTThis report on student indebtedness is based primarily on a

current study which is measuring the average Stafford loan balance facingstudents, as well as indicators of payment stress. The study is based on dataon about 325,000 loans from the USA Group's entire loan servicing portfolio,

which includes both subsidized and unsubsidized Stafford loans issued underthe Federal Family Education Loan Program. The study examined debt levels forfour borrower groups categorized by school type: four- and five-yearinstitutions, graduate and professional schools, two- or three-year colleges,and proprietary vocational schools. Findings are detailed for the following:(1) average Stafford balances, principal only; (2) average cumulativeStafford indebtedness, including principal and accrued interest; (3)

indebtedness levels, borrower distribution; (4) data suggesting that the debt

burden growth is beginning to moderate; (5) minimum annual income needed tosupport post-school indebtedness; and (6) development of payment stressindicators, including repayment plan selection rates, repayment status anddelinquency rates. Conclusions indicate that students are going more deeplyinto debt to finance their postsecondary education, with graduate studentsborrowing the most under the Stafford loan program. Detailed tables areappended. (Contains 31 references.) (DB)

********************************************************************************* Reproductions supplied by EDRS are the best that can be made *

* from the original document. *

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--"rtor

usAGroup Foundation

New Agenda Serier

Critatcdt

tu ent In e _ te _ nessm Are Borrowers Pushing the Limits?

Patricia M. Scherschel

EEST COPY =LA LE 2

VOLUME 1 NUMBER 2 NOVEMBER 1998

1

kik

Irk14

PERMISSION TO REPRODUCE ANDDISSEMINATE THIS MATERIAL HAS

BEEN GRANTED BY

USA Group Foundation

TO THE EDUCATIONAL RESOURCESINFOPMATION CENTER (ERIC)

U.S. DEPARTMENT OF EDUCATIONOffice of Educational Research and Improvement

EDUCATIONAL RESOURCES INFORMATIONCENTER (ERIC)

Eg4his document has been reproduced asreceived from the person or organizationoriginating it.

0 Minor changes have been made toimprove reproduction quality.

Points of view or opinions stated in thisdocument do not necessady representofficial OERI position or policy.

>

Acknowledgments

This report is based on a series of statistical reports drawn from USA

Group Loan Services®' borrower account database. These reportswere painstakingly compiled by David Pawlus and Paul Behymer.

Several individuals offered valuable assistance throughout the

research process. In particular, the Foundation would like to

acknowledge the guidance provided by USA Group® colleagues,

including Robert L. Zier, Dan Yost, and Susan Conner, and the editing

expertise of Jean Rose and Natasha Swingley.

TABLE OF CONTENTS

Introduction

USA Group Study

Summary of Results

I. Average Stafford Balances Principal Only

II. Average Cumulative Stafford Indebtedness,Including Principal and Accrued Interest 10

III. Indebtedness Levels Borrower Distribution 11

IV. Is Debt Burden Growth Beginning to Moderate? 12

V. Minimum Income Needed to SupportPost-School Indebtedness 15

VI. Development of Payment Stress Indicators 17

Conclusions and Recommendations 22

Endnotes 24

Data Limitations/Methodology/Database Design 26

Appendix 29

FoolltIOCK;.

usaGroup Foundation New Agenda Series"'

by:


Director, Policy Research

and Consumer Issues

USA Group, Inc.

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USAGIOUp Foundation-

Student IndebtednessAre Borrowers Pushing the Limits?

Introduction

A fter Congress increased student loan limits and easedborrowing restrictions in the early 1990s, few in the

financial aid community were surprised by the immediate anddramatic surge in the annual volume of Stafford loans, thenation's largest single source of federal financial aid to students.

But, as gravity-defying indebtednesscontinued to grab headlines in the late1990s, some researchers and policy makersbegan to ponder just how many moredollars students would be willing and ableto borrow to fund their postsecondaryeducation. Others asked just how muchhigher typical debt loads could rise, notingthat, absent another increase in annualborrowing limits, the upward trend instudent indebtedness would eventuallyhave to level off.

Data gathered by an ongoing study atUSA Group show that average studentindebtedness continued to grow in 1998,but at a markedly slower pace than in 1997and 1996, especially for students attendingfour- or five-year undergraduate programs,

two- and three-year schools, and communitycolleges. This trend is illustrated in ChartsI-1 and 11-2. For example, the average

cumulative undergraduate Stafford loanbalance, including accrued interest, forstudents who left school in the first half of1998 rose 1 percent to $9,830. In contrast,undergraduate Stafford balances rose onaverage by 4.5 percent in 1997 and nearly9 percent in 1996.

Growth rates also declined for studentsat graduate and professional schools andfor-profit vocational schools. The averagetotal Stafford balance for graduate studentsrose 12 percent to $22,938, followingincreases of 25 percent in 1997 and 44percent in 1996.

Despite the apparent slow down in thegrowth rate for Stafford loan balances,

student indebtedness does not appear to begetting any easier to manage. Paymentstress indicators tracked by the USAGroup study show that a growingpercentage of borrowers are seeking ways

to reduce their monthly payment burden.For example, 8.5 percent of Staffordborrowers and 18 percent of consolidationborrowers entering repayment are nowchoosing graduated repayment, up from6.7 percent and 16.2 percent, respectively,a year earlier. Moreover, record numbers ofpost-grace Stafford borrowers are usingdeferment and forbearance to postponetheir loan payments. In fact, based on dataprovided by USA Group's loan servicingportfolio, nearly one in five borrowers with

unsubsidized Stafford loans is in forbearance.

Cause for concernThe USA Group Stafford indebtedness

surveys, as well as other studentindebtedness studies, grew out of concernsabout the unprecedented pace of studentborrowing under the federal educationloan programs during the 1990s. Financialaid administrators, public policy makers,and lawmakers are increasingly voicing

fears that student borrowing is reachingexcessive levels.

The danger that increasing post-schoolindebtedness will put more borrowers atrisk of default is but one of their concerns.Just as worrisome are nagging questionsabout whether the prospect of heftystudent loan payments may force ageneration of college students, especiallythose planning to pursue graduate degrees,to limit their education choices, restricttheir career plans to more lucrative fields

of work, or fundamentally alter family andlifestyle goals.

The potential repercussions aresobering. Should the rise in student debtlevels reverse the current downward trendin the nation's student loan default rate,'lawmakers could decide to restrict theavailability of federal loans. Bigger post-

school debt burdens will require borrowersto allocate more discretionary income totheir monthly student loan payments,

Chart 1-1

Average Cumulative Stafford Borrowing Principal Only

$25,000

$20,000

$15,000

$10,000

$5,000

1998

1997

1996

Fl 1995

$0

$21,698

$19,568

0111 $15,934

$11,256

$9 484

$9,448

$8,473 $4,374$6,444

Graduate

Undergraduate

Proprietary

Community College

NOTE: Figures show average Stafford indebtedness for students leaving school during the first six months of the year.Accrued interest on unsubsidixed Stafford loans is not included. Source: USA Group Loan Services, Inc.IUSA Group, Inc.

Data gathered by

an ongoing study

at USA Group

show that

average

student

indebtedness

continued to grow

in 1998, but at a

markedly slower

pace than in

1997 and 1996,

especially for

students attending

four- or five-year

undergraduate

programs.

Researchers in

the higher

education

community are

seeking to

measure student

debt and the

ability of

borrovms

to meet their

monthly student

loan payments.

reducing their financial capacity to buycars, purchase and furnish their homes,save for their children's college expenses,

and build a retirement nest egg. Mountingdebt loads could reduce the supply ofstudents willing to pursue low-payingpublic service careers, in teaching andsocial work, for example. Worse yet, someindividuals may conclude they cannotafford to invest in a college degree.

In response to these concerns,researchers in the higher educationcommunity are seeking to measure studentdebt and the ability of borrowers to meettheir monthly student loan payments.Critical to their analysis is the ability toaccurately and consistently monitorborrowing and repayment trends, but thesupply of up-to-date, indebtednessstatistics is limited.

Just how much do we know aboutstudent indebtedness? The U.S.Department of Education (the Department)

tallies aggregate, national new loan volumeand average loan disbursements on aquarterly basis. Between the inception ofthe federal loan programs in 1966 and theend of fiscal year 1997, students andparents borrowed an estimated $271.7billion. They borrowed more than 40percent of this amount $111.6 billion

in just four fiscal years (FY1994,

FY1995, FY1996, and FY1997). Duringthis period, the average Stafford loan

amount rose by nearly $600 to $3,751.2The Department does not track, on an

aggregate basis, annual changes in

cumulative indebtedness that is, howmuch borrowers typically owe uponleaving school. The current research on

post-school debt loads primarily relies ondata generated by a triennial samplingsurvey the national PostsecondaryStudent Aid Study (NPSAS),3 conductedby the National Center for EducationStatistics (NCES), and occasional papers

$25,000

$20,000

$15,000

$10,000

$5,000

$01998

II 1997

1996

E 1995

Chart 1-2

Average Post School Stafford Balances

Including Accrued Interest on Unsubsidized Loans

Graduate

Undergraduate

Proprietary

Community College

NOTE: Figures include cumulative Stafford loan disbursements and accrued-but-unpaid interest on subsidized Stafford loansfor borrowers who left school in the first six months of the year. Source: USA Group Loan Services, Inn/USA Group, Inc.

BESTCOPYAVAIIABLE

and reports.' Many of the latter are basedon NPSAS data; one of the most recentcontributions, Early Labor Force Experiences

and Debt Burden, for example, is based onfollow-up surveys to the 1992-93 and1989-90 NPSAS data sets.5

The latest sets of official indebtednessdata were compiled by the 1995-96NPSAS.6 The NCES recently began topublish findings from this study, whichsurveyed 50,000 students and which, forthe first time, incorporates data from theNational Student Loan Data System(NSLDS). Researchers have begun to

compare the 1995-96 NPSAS data toprevious survey results to analyze recent

trends in student indebtedness. An analysisof the NPSAS conducted by JacquelineKing of the American Council onEducation found substantial increases inaverage indebtedness. Accumulated school

debts for students who completed theirdegree programs in 1995-96 were 40percent to 82 percent higher than the debtlevels reported by the 1992-93 NPSAS.However, King's analysis also shows thatthe debt levels, in general, appear to bemanageable in relation to post-schoolincomes and that the majority of studentspursuing undergraduate, master's, andnonprofessional doctoral degrees had not

borrowed to finance their education.'The Education Department's NPSAS

surveys provide an extensive source of dataon indebtedness, but their triennialschedule limits their effectiveness intracking growth in student debt levels. Anannual series would not only improve theability to measure the growth rate inindebtedness but also potentially aidresearchers in gauging the impact ofchanges in interest rates, tuition increases,economic conditions, and other factors inborrowing patterns.

Various education organizations alsocompile cumulative debt statistics forstudents pursuing graduate degrees inparticular areas of study. For example, the

American Association of Medical Colleges(AAMC) tracks indebtedness of medical

students. The association's most recentdata show that the average indebtednessfor medical school students who graduatedin 1997 was $80,462, an increase of 7.1percent from the average debt load of$75,103 reported by the Class of 1996.The median loan balance rose nearly 12

. percent to $80,000 from $71,500.8Other loan sources are being tallied as

. welt In response to reports that studentsare showing an increased appetite for

. private loans and credit cards, researchersare seeking to determine how much non-

: federal loans are adding to student

: indebtedness. The College Board's annualTrends in Student Aid survey now compiles

data on nonfederal education loans. provided by private lenders, state agencies

: and others. According to the 1997 Trendsreport, nonfederal borrowing bypostsecondary students jumped 15 percentto $1.5 billion during the 1996-97financial aid award year. The CollegeBoard data, however, cover only the largestof the numerous private loan programs

. reportedly now being offered in the U.S.9

: Researchers are tackling the arduoustask of estimating the use of credit cardsby students to fund college costs.

. According to a 1997 survey of collegeborrowers by Nellie Mae, slightly morethan one-fourth (26 percent) of therespondents had used credit cards to help

. finance their education, while 6 percenthad borrowed under private loan programsfor graduate students.m However, a reportpublished in June 1998 by The EducationResources Institute and the Institute for

; Higher Education Policy found that 64percent of students surveyed had at leastone credit card. Of those who had creditcards, 59 percent reported paying off theirbalances in full each month. The June1998 survey results indicate that the vastmajority of students whO do maintain arevolving balance on their credit cards owe

(CI

According to a

1997 survey of

college borrowers

by Nellie Mae,

slightly more

than one-

fourth(26 percent)

of the

respondents had

used credit cards

to help finance

their education.

1<W

usAGroup Foundation"

Lenders typically

recommend that

the monthly

student loan

installments

not exceed 8

percent of the

borrower's pretax

income.

usaGroup Foundation'

less than $1,000. These studiesappropriately note the need for moreresearch into credit card debt and theability of young graduates to manage theircard balances and student loans.H

An up-to-date data series on studentindebtedness is just one piece of the debtburden puzzle. The financial aidcommunity and policy makers also needstatistical tools for measuring the ability ofrecent graduates to repay their debts. Howmuch debt an individual can afford iscontingent on several factors, includingincome and the rate of interest theborrower must pay. The length of thepayback period and the type of repaymentplan (level, graduated, or income-basedrepayment) are also key determinants ofthe monthly payment burden. One of themost frequently cited measures of

affordability is the percentage of grossmonthly income needed to cover themonthly student loan installment; this isknown as the debt-to-income ratio.Researchers seeking to measure paymentstress have suggested debt-to-income

guidelines ranging from 5.7 to 15 percentof pretax income, and some analysts havesuggested that debt burden ratios shouldvary according to income levels.'2

Lenders typically recommend that themonthly student loan installments notexceed 8 percent of the borrower's pretaxincome in order to ensure that borrowershave sufficient funds available to covertaxes, car payments, rent or mortgagepayments, and household expenses. The 8-percent rule appears to be derived fromstandard credit underwriting standards thatlimit monthly mortgage paymentsincluding payments for principal, interest,

insurance, and taxes) to 25 to 29 percent ofthe borrower's income and total monthly

debt service payments to 36 to 41 percent ofincome. Given that many borrowers arelikely to have credit card bills or car

payments, the 8-percent rule seems to be areasonable benchmark for student loans.

g,1

Higher ratios may be acceptable forcertain groups of borrowers. For example,students pursuing medical or law degreescan reasonably expect to earn substantialincomes after they complete their

education. Conversely, borrowers with lowdebt loads or modest living expenses mayalso be able to tolerate higher debt-to-income ratios.

Yet, debt-to-income ratios are of limiteduse to lenders in monitoring paymentstress. Some borrowers, particularly thosewith large credit card balances, mayexperience payment stress at ratios of lessthan 8 percent, while borrowers withsubstantial incomes may easily toleratehigher ratios. Moreover, borrowers gener-ally do not have to report their post-schoolincomes to lenders.'3 From an operationsstandpoint, the financial aid communityand lenders could be well served by thedevelopment of other payment stressindicators, based on more readily availableand easily updated information, such as

borrower payment status.

Borrower Databasefor Indebtedness Analysis

Number of Borrowers Entering GracePeriod During JanuaryJune

1998 77,0001997 84,0001996 92,0001995 79,000

In all, USA Group has examined therecords of more than 332,000 Stafford

borrowers who entered the grace periodduring the first six months of each of

the years included in the study. Nearlythree-fifths of these borrowers wereclassified as undergraduate students

attending four-year institutions. Graduatestudents accounted for about 11 percent,

students attending two- or three-yearcolleges, 12 percent; and proprietary

school students, approximately 21percent. The database includes borrowers

from across the United States.

USA Group Study

n 1996, USA Groupand its affiliate, USA

Group Loan Services, began along-term project to track theindebtedness of student

borrowers whose loans are

administered by USA GroupLoan Services.

The ultimate goal is to develop amechanism for monitoring and analyzingcurrent trends in student debt loads andthe ability of borrowers to repay theireducation loans. Although the servicingportfolio cannot be viewed as perfectlyrepresentative of the universe of studentloans, it offers the size and scope neededfor a national study. USA Group currentlymanages a $13 billion loan portfolio onbehalf of approximately 150 lenders" andmore than 1.6 million student and parentborrowers nationwide.

The goal of this project is to lay thegroundwork to develop a mechanism formonitoring and analyzing current trendsin student debt loads and the ability ofborrowers to repay their education loans.The first phase of the USA Group studyhas focused on two objectives: (1)determining the average Stafford loan

balance facing students when theygraduate or leave school, tracking theannual rate of change in studentindebtedness, and (2) identifyingindicators of payment stress, includingdelinquency rates and borrower reliance onreduced-payment options.

Although the USA Group studymeasures only Stafford indebtedness, theresults should help assess general trends instudent loan burdens. The Stafford loan

program is the single largest federal sourceof debt financing for postsecondarystudies. According to The College Board,subsidized and unsubsidized Stafford loansaccounted for 95.8 percent of the $28.6billion in federal education loans issued tostudent borrowers during the 1996-97academic year. In contrast, the totalvolume of Perkins loans issued to studentsduring the 1996-97 academic year was$943 million, or 3.3 percent of totalfederal loans. Other federal loans,including loans to students pursuingdegrees in the health-care profession,amounted to only $261 million,accounting for less than 1 percent offederal loans to students.'5

As of yet, there are no regularlypublished, comprehensive data on privatefunding sources. The available datasuggest, however, that student borrowingunder nonfederal loan programs is modestin comparison to federal borrowing activity.

Based on The College Board's estimate,nonfederal loans provided to students andparents by institutions and state loanprograms equaled less than 6 percent of the

Data Limitations

At present, the USA Group study isrestricted to subsidized and

unsubsidized Stafford loans issuedunder the Federal Family EducationLoan Program (FFELP). At this time,

the study does not providebreakdowns for borrowers attending

public institutions vs. borrowersattending private schools; nor does itdifferentiate between borrowers whocompleted their degrees or certificate

programs and those who did not.Because the USA Group study isbased on virtually its entire loan

servicing portfolio, the results are notsubject to sampling error, at least as

they pertain to USA Group'scustomer base.

Subsidized and

unsubsidized

Stafford loans

account for 95.8

percent of the

$28.6 billion in

federal

education

loans

issued to student

borrowers during

the 1996-97

academic year.

USAGrollp Foundation'

1 o

Annual StaffordBorrowing Limits

Subsidized Maximum

Loan Limit Loan Amount

Dependent Undergraduate

Students

First Year $ 2,625

Second Year $ 3,500

Third Year $ 5,500

Fourth Year $ 5,500

Fifth Year $ 5,500

$ 2,625

$ 3,500

$ 5,500

$ 5,500

$ 5,500

Independent Undergraduate

Students

First Year $ 2,625 $ 6,625

Second Year $ 3,500 $ 7,500

Third Year $ 5,500 $10,500

Fourth Year $ 5,500 $10,500

Fifth Year $ 5,500 $10,500

Graduate Students

Each Year $ 8,500 $18,500

Source: U.S. Department of Education.

estimated volume of Stafford loans (includ-

ing both guaranteed and direct loans) issued

during academic year 1996-97.'6This report builds upon the project's

initial findings, which were published inthe fall of 1997, in an informal briefingpaper: Reality Bites: How Much Do Students

Owe?17 The latter examined the loan

records of more than 250,000 borrowersand calculated indebtedness estimates for1995, 1996, and 1997. By adding studentloan data for 77,000 students who leftschool in the first half of 1998, this reportextends the period of trend analysis to fouryears. A summary of the database isprovided on page 6, and a brief discussionof the data's limitations appears on page 7;a more detailed description of the databasecan be found on page 26.

Indebtedness data

The study examines debt levels for fourborrower groups categorized by school:four- and five-year institutions, graduateand professional schools, two- or three-yearcolleges, and proprietary vocationalschools. In addition to determining theaverage (mean) Stafford loan balance forborrowers entering the grace period, thestudy provides a debt-range distribution toshow the concentration of borrowers withlow, moderate, and heavy debt loads.

The study compiled two different seriesof data on indebtedness. The first dataseries focuses on the principal balance owed

by borrowers at the time they left school.This series, thus, measures average totaldisbursements of Stafford loans. Thesecond data series measures the averagetotal loan balance that is, principal owedat the time the borrowers entered the six-month, post-school grace period plusaccrued interest. This measurement is totake into account borrowers' increasingdependency on unsubsidized Staffordloans. The federal government pays theinterest that accrues on a borrower'ssubsidized Stafford loans while the

borrower is in school and during the graceperiod. Borrowers, however, must pay allof the interest that accrues on unsubsidizedStafford loans; this interest can be deferreduntil the beginning of the repaymentperiod.

The volume share of unsubsidizedstudent loans has more than doubledduring the 1990s. Unsubsidized loans grewfrom 15.8 percent of total Stafford/SLS'8volume during the 1991-92 financial aidaward year to 36.8 percent during the1996-97 award year, according to figurescompiled by The College Board.°Preliminary data from the Department ofEducation indicate that the unsubsidizedStafford loan share rose to nearly 38percent during the first six months of the1997-98 financial aid award year.2°

This increase is generally attributed toseveral factors, including the escalatingcost of attending college and the creationof the unsubsidized Stafford program in1992. In addition, the eligibility rules forunsubsidized Stafford loans make itpossible for virtually all students to borrowunder the unsubsidized loan programwithout regard to their ability todemonstrate financial need.

Today's students can and do borrowsubstantial amounts under the Staffordprogram.21Annual limits range from$2,625 to $10,500 for undergraduates.Dependent undergraduates can borrow asmuch as $23,000 to finance abaccalaureate degree. Undergraduates whoare financially independent of their parentsmay borrow up to $46,000, although onlyhalf of this amount may be subsidized.

Many graduate students easily qualifyfor the maximum annual Stafford loanlimit of $18,500. Of this amount, only$8,500 can be subsidized, which means theinterest meter is ticking on the unsubsidized

portion of $10,000. At current interestrates, simple interest is accruing at anannual pace of approximately $750 per$10,000 of unsubsidized debt.

BESTCOFT,WAILApLE

In all, an eligible student may receiveStafford loan disbursements totaling$138,500 to finance undergraduate andgraduate studies; of this amount, no morethan $65,500 may be subsidized. Aborrower who lets the interest ridethroughout his/her academic career on asubstantial amount of unsubsidized loanswill face a repayment balance that issignificantly greater than the amount

borrowed.Annual loan limits play an important

factor in gauging student indebtednessdata. Because of the relatively low limitsthat apply during a borrower's early yearsof study, changes in the college drop-outrate among undergraduate students canaffect average indebtedness. Moreover, ifan increasing number of students borrowthe maximum loan amounts throughouttheir academic careers, the presence ofloan limits will curb the growth rate inStafford indebtedness. The impact ofStafford loan limits on debt burdens isdiscussed in greater depth in section IV ofthis paper.

Payment stress dataTo determine whether increasing

student debt burdens are becoming moredifficult to manage after borrowers leaveschool, the study explores possibleindicators of payment difficulties.Borrower delinquency rates are well-established indicators of payment stress forboth the home mortgage industry andcredit card issuers. The USA Group LoanServices data base maintains up-to-daterepayment status data for more than 1million Stafford borrowers. In addition,the study has begun to examine selectionrates for the various repayment options(including standard, graduated, andincome-sensitive paynient plans) available

to borrowers.

BESTCOPyAVA1LABLE

Summary of Results

he next three sectionsexamine (1) average

cumulative Stafford loanbalances principal only;(2) average total Stafford loanbalances, including principaland accrued interest; and (3)the distribution of borrowersacross a range ofdebt levels.

The fourth section explores possiblereasons for a slowdown in the growth rateof Stafford debt burdens.

The last two sections focus on measuresof borrowers' ability to manage theirstudent loans. The fifth section estimatesannual income levels needed to supportpost-school indebtedness. The sixthsection discusses possible statistical

indicators of borrower payment stress.Detailed data compiled for the study

are provided in the Appendix.

I. Average Stafford BalancesPrincipal Only

All four student borrower categoriesposted debt gains in 1998, but the rate ofincrease slowed markedly for all of the

categories, with the exception ofproprietary school students.

As shown in the table to the right, thetypical indebtedness for undergraduatesedged up by less than half a percent, to$9,484. The rate of increase fell by 89percent from the year-earlier rate, and the1997 rate was approximately half the 1996

increase.Total Stafford borrowing by graduate

and professional students expanded by10.9 percent, less than half the 22.8

1 2

Annual CumulativeStafford Borrowing

Annual

Percentage

Change

Graduate Students1998 $21,698 +10.9%

1997 $19,568 +22.8%

1996 $15,934 +41.6%

1995 $11,256

Undergraduate Students1998

1997

1996

1995

$ 9,484 + 0.4%

$ 9,448 + 3.7%

$ 9,115 + 7.6%

$ 8,473

Community/2/3-YearCollege Students1998 $ 4,374

1997 $ 4,251

1996. $ 3,924

1995 $ 3,532

Proprietary SchoolStudents1998 $ 7,710

1997 $ 7,122

1996 $ 6,444

1995 $ 4,981

+ 8.3%

+10.5%

+29.4%

Figures include the cumulative

principal balance of Stafford loans for

borrowers leaving school in the first

half of the year. Figures exclude

accrued-but-not-yet-capitalized

interest.

Source: USA Group Loan Services, Inc./

USA Group, Inc.

9

USA G roup Foundatiorf

Annual CumulativeStafford Loan Balances

Impact

of

Accrued

Interest on

Average

Balance

Graduate Students

1998 $22,938 +$1,240 +5.7%

1997 $20,457 +$ 889 +4.5%

1996 $16,357 +$ 423 +2.7%

1995 $11,359 +$ 103 +0.9%

Undergraduate Students

1998 $ 9,830 +$ 346 +3.6%

1997 $ 9,723 +$ 275 +2.9%

1996 $ 9,302 +$ 187 +2.1%

1995 $ 8,551 +$ 78 +0.9%

Community/2/3-Year

College Students

1998 $ 4,525 +$ 151 +3.5%

1997 $ 4,358 +$ 107 +2.5%

1996 $ 4,004 +$ 80 +2.0%

1995 $ 3,565 +$ 33 +0.9%

Proprietary School Students

1998 $ 7,997 +$ 287 +3.7%

1997 $ 7,364 +$ 242 +3.4%

1996 $ 6,624 +$ 180 +2.8%

1995 $ 5,037 +$ 56 +1.1%

Figures include average cumulative

principal balance of Stafford loans and

accrued-but-not-yet-capitalized interest

for borrowers leaving school in the

first half of the year.


USA Group, Inc.

percent rate posted in 1997 andapproximately one-fourth the 1996 rate.Although the downward trajectory ingraduate debt growth rates is welcomenews, 1998 saw a $2,130 increase in theaverage Stafford debt load to $21,698.This amount includes debts incurredduring the borrowers' undergraduatestudies.

For borrowers who left communitycolleges and other two- and three-yearschools (both public and private) in thefirst half of 1998, the estimated averageStafford principal balance is $4,374, anincrease of 2.9 percent from the year-earlier level. In 1997, the average

cumulative Stafford principal balance rose8.3 percent to $4,251.

The rate of increase for studentsattending for-profit vocational schools alsofell in 1998, but to a much lesser extent.The average amount borrowed rose 8.3percent to $7,710. Average Staffordborrowing for students who left vocationalschools in 1997 was $7,122, up 10.5percent from 1996.

II. Average Cumulative StaffordIndebtedness, IncludingPrincipal and Accrued Interest

Capitalized interest is becoming a moresignificant contributor to student loanbalances, including those of proprietary and

community college students. To analyzethe impact of the growing reliance onunsubsidized Stafford loans, the USAGroup study compiled cumulative debttotals that include both principal and theamount of interest that has accrued (buthas not yet been paid) by the students'departure date. The general practice forlenders served by USA Group LoanServices is to let interest accrue on a simplebasis during a borrower's in-school periodand the grace period. This interest is thencapitalized in lump sum at the beginningof the repayment period. At this point, theborrower begins to pay interest on interest.

Accrued interest increased the averagecumulative Stafford debt for graduatestudents leaving school in the first half of1997 by $1,240, or 5.7 percent, to anestimated $22,938. In contrast, forstudents leaving graduate school in thefirst half of 1995, accrued interestincreased average indebtedness by only$103, or 0.9 percent, to $11,359.

The average cumulative Stafford loanbalance, including principal and accruedinterest, for undergraduate borrowersleaving school in the first half of 1998 is anestimated $9,830, $346 more than theaverage principal-only balance of $9,484.Thus, accrued interest increased theaverage balance by 3.6 percent. Theaverage total Stafford balance exceeded theaverage Stafford principal balance by 2.9percent in 1997 and 0.9 percent in 1995.

For proprietary school students, accruedinterest increased the 1998 average

cumulative loan balance by $287, or 3.7percent, to $7,997. A year earlier, interestincreased the typical Stafford debt load by$242, or 3.4 percent, to $7,364.

For community college borrowers wholeft school in the first half of 1998, accruedinterest increased the average total Staffordbalance by $151, or 3.5 percent, to$4,525. Three years earlier, accruedinterest added only $33, increasing averageStafford indebtedness 0.9 percent to$3,565.

These data indicate that, in percentageterms, accrued interest has approximatelythe same impact on proprietary school andcommunity college students as it does onundergraduates. This is noteworthy inlight of the fact that community collegeand proprietary school programs aretypically completed within two years,providing less time for interest to accrue.This suggests that community college andproprietary school students rely moreheavily on unsubsidized Stafford loansthan do undergraduates. Althoughcommunity colleges and proprietary

1' A

schools are more likely to draw studentsfrom lower-income groups, their studentpopulations include more nontraditionalstudents: that is, older students who areindependent of their parents' financialsupport."

According to the Department ofEducation's Federal Student Loan Programs

Data Book for Fiscal Years 1994-1996,proprietary school students accounted for17.1 percent of all unsubsidized Staffordborrowers in fiscal year 1996, comparedwith just 9 percent in fiscal 1994. Duringthe same period, proprietary students'dollar-volume share rose from 6.8 percentto 12.8 percent. In contrast, theproprietary student share of subsidizedStafford borrowers has hovered in the 13-14 percent range during fiscal years 1994,1995, and 1996. These students receivedapproximately 9-10 percent of the dollarvolume of subsidized Stafford loans issued

each year.23

In view of the rapid increase inunsubsidized Stafford loans in recent years,it is reasonable to expect the differencebetween the cumulative Stafford loandisbursement amount and the actualamount to be repaid to continue to widenin the years ahead.

III. Indebtedness LevelsBorrower Distribution

USA Group's study shows that morestudents are joining the ranks of theheavily indebted. An examination of thedistribution of borrowers across a range ofdebt levels reveals that the share ofundergraduate and graduate studentborrowers who leave school with

cumulative debts in excess of $25,000 hasincreased significantly during the pastthree years.

As demonstrated in the tables on pages11 and 12, the share of graduate studentswho borrow more than $25,000 appearsto be expanding at a sobering rate. In all,26.2 percent of the graduate students who

left school in the first half of 1998 haveborrowed at least $25,000 in Staffordloans, up from 23.6 percent in 1997 and9.9 percent in 1995. After taking intoaccount accrued interest, an estimated 27percent of graduate Stafford borrowershave accumulated debts in the $25,000-and-up category; only 10 percent were inthis category in 1995. The average level of

total Stafford indebtedness (principal andinterest) for graduate students in thisgroup has risen dramatically, from $35,836in 1995 to an estimated $58,134 in 1998.For details, please see Table Series I and II

in the Appendix.Although the $25,000-and-up club

accounts for a minority of undergraduates,a near-doubling of the percentagedistribution, from 3.0 percent of the 1995cohort of borrowers to 5.7 percent of the1998 cohort, is remarkable. When accruedinterest is included in the average debttotals, the share of undergraduates whohave to repay $25,000 or more rises to 6.3percent.

About two in 100 students attendingproprietary schools amass Stafford debts inexcess of $25,000. However, even thisgroup of borrowers has seen a significantincrease. Just 0.1 percent of all Staffordborrowers who left proprietary schools inthe first half of 1995 owed at least $25,000(in principal and accrued interest). By1998, this group's share had risen to anestimated 2.3 percent. The percentage ofthe borrowers owing $10,000 to $24,999has more than tripled since 1995, risingfrom 8.5 percent to 26.7 percent.

At present, approximately two out ofthree borrowers who attended communityand other two-year colleges owe less than$5,000, based on the 1998 data; 26percent have accumulated Stafford debts of$5,000 to $9,999. Just under 1 percent oftwo-year college students have borrowed$20,000 or more. Three years ago, none ofthe borrowers in this category owed morethan $20,000.

1 4

Distribution byStafford Borrowing

Percentage of borrowers who received

Stafford disbursements totaling -

1998

Less than $5,000

Graduate 19.4%

Undergraduate 35.7%

Community College 66.9%

Proprietary 42.4%

1995

28.4%

35.6%

74.9%

57.7%

$5,000 - $9,999Graduate 22.3% 29.0%

Undergraduate 27.2% 30.9%

Community College 26.0% 22.8%

Proprietary 30.1% 34.1%

$10,000 - $14,999Graduate 13.5% 18.1%


Community College 5.1% 2.3%


$15,000 - $19,999Graduate 14.1% 10.7%




$20,000 - $24,999Graduate 4.6% 3,9%




$25,000 or moreGraduate 26.2% 9.9%





USA Group, Inc.

!It


Distribution byTotal Indebtedness

Percentage distribution based

on combined principal and

accrued interest -

1998

Less than $5,000Graduate 19.0%

Undergraduate 35.3%


Proprietary 41.7%

$5,000 - $9,999Graduate 22.0%

Undergraduate 26.9%


Proprietary 29.4%

$10,000 - $14,999Graduate 13.3%

Undergraduate 15.3%


Proprietary 15.7%

$15,000 - $19,999Graduate 13.2%

Undergraduate 11.8%


Proprietary 7.5%

$20,000 - $24,999Graduate 5.5%

Undergraduate

Community College

Proprietary

4.4%

0.6%

3.5%

$25,000 or moreGraduate 27.0%

Undergraduate 6.3%


Proprietary 2.3%

1995

28.3%

35.4%

74.6%

57.0%

28.9%

30.8%

22.9%

34.4%

18.0%

17.9%

2.4%

6.7%

3.9%

2.9%

0.4%

10.0%

3.0%

0.1%


USA Group, Inc.

The percentage of undergraduateborrowers who owe less than $5,000actually increased in 1998, to 35.3 percentfrom 33.7 percent in 1997. At face value,this statistic suggests a reduction instudent indebtedness. However, thereduction could reflect an increase in theundergraduate drop-out rate. Borrowerswho quit school after a year or two willhave lower loan balances than those whopersist for four or five years and receive

their degrees. But the modest loanbalances of college dropouts are morelikely to slide into delinquency and defaultthan the higher debt loads borne by thosewho complete their degrees. Less debtmeans less education and weaker earningpower. Indeed, earlier research by LauraGreene Knapp and Terry Seaks concludedthat failure to finish the degree is a leadingindicator of default."

IV. Is Debt Burden GrowthBeginning to Moderate?

The mid-1990s surge in Staffordborrowing is generally attributed to anumber of factors, including:

O The rising cost of higher education.O The growing use of debt to finance

undergraduate studies.O Increases in Stafford borrowing

limits.

O The creation of the unsubsidizedStafford loan program, which allowsstudents to borrow without regardto need.

O An increased willingness of studentsto borrow to pursue higher educa-tion, particularly a graduate degree.

These factors are significantly magnifiedat the graduate school level. Graduatedegrees, especially professional degrees inmedicine and law, entail much biggertuition bills. Graduate students also enjoyhigher loan limits. Then, too, the increasein graduate student indebtedness may be a

direct reflection of the fact that individualscan borrow the substantial sums needed tofinance their master's, professional, ordoctoral degrees. Nellie Mae's recent debtburden survey found that 69 percent ofthe graduate students felt that theavailability of loans was extremely

important or very important to theirability to enroll in graduate school." Inthis view, Stafford loans for graduatestudents are essentially enablers.

Still, the sharp reduction in the growthrates for most postsecondary students,especially undergraduates, in 1997 and1998 suggests that the rate of increase inStafford indebtedness may be leveling off.(See Charts II-I and 11-2 on pages 14 and15.) One possible explanation is thepresence of annual limits on the amountsstudents may borrow. As noted earlier,federal rules restrict annual undergraduatedisbursements to $2,625 to $10,500,depending on the borrower's year in schooland status as a dependent or independentstudent. Most graduate students mayborrow no more than $18,500 annually.(Loan limits were recently increased formedical school students to offset thephase-out of another federal loanprogram.')

As shown in the table on the next page,the current Stafford loan limits were put inplace following legislation enacted duringthe early- to mid-1990s. The increases thattook effect in 1992 and 1993 werefollowed by sharp upswings in average

Stafford loan disbursements during the1993-94 and 1994-95 academic years.Since then, average loan disbursementshave continued to increase, albeit at alower rate.

These limits are now expected toremain in force at least through the end ofthe decade. At this writing, Congress isfinalizing legislation to reauthorize thefederal loan programs through fiscal year2002, and a provision to increase thelimits for subsidized or unsubsidized

Current Stafford Loan Limits and Dates of Inception

Current

Annual Limit

for Subsidized

Stafford

Loans

Year When

Current Loan

Limit Went

Into Effect

Current

Annual Limit

for

Unsubsidized

Stafford Loans

Year When

Current Loan

Limit Went

Into Effect

1st Year $2,625 1992 $6,625 1994

2nd Year $3,500 1993 $7,500 1994

3rd, 4th,

or Later Year $5,500 1993 $10,500 1994

Cumulative

Undergraduate

Borrowing

Limit

$23,000 1992 $46,000 1994

Graduate

School$8,500 1993 $18,500 1994

Cumulative

Borrowina

Limit

$65,000 1992 $138,500 1994

NOTE: Annual limits for unsubsidized Stafford loans are reduced by the amount ofany subsidized Stafford loans issued to the borrowers.

Prior to the inception of the unsubsidized Stafford loan program in July 1994,borrowers obtained unsubsidized loans through the Supplemental Loans forStudents (SLS) program. The $138,500 aggregate borrowing limit forsubsidized and unsubsidized student loans became effective in 1992. Higherannual and aggregate loan limits are in effect for students attending certainmedical schools. Annual limits vary according to the length of the student'senrollment period and type of program, and can range up to $45,167. Theaggregate Stafford borrowing limit for medical school students is $189,125

(subsidized and unsubsidized combined).

Source: NCHELP Common Manual, US. Department of Education.

Total Annual StaffordLoan Volume

Annual volume includes subsidized

and unsubsidized Stafford loans.

Financial Aid

Award Year

Total

Stafford

Borrowing

(in bill

Annual

Gain

1990-91 $11.712 3.3%

1991-92 $12.827 9.5%

1992-93 $13.635 6.3%

1993-94 $19.648 44.1%

1994-95 $22.885 16.5%

1995-96 $24.948 9.0%

1996-97 $27.433 10.0%

Total Annual PLUSLoan Volume

Annual volume includes subsidized

and unsubsidized Stafford loans.

Financial Aid

Award Year

Total

PLUS

Borrowing

(in bil.)

Annual

Gain

1990-91 $ .957 18.4%

1991-92 $1.165 21.7%

1992-93 $1.279 9.7%1993-94 $1.529 19.5%

1994-95 $1.840 20.3%1995-96 $2.436 32.4%1996-97 $2.677 9.9%

Data for 1990-91, 1992-93, 1993-94, and 1994-95 include SLSloans, which were discontinued in1994. Data for 1994-95 and lateryears include loans issued underboth the Federal FamilyEducation Loan and Direct Loanprograms.

Source: U.S. Department of Education,

The College Board.

BEST COPY AVAILABLE

A slowdown in

the growth rate

for average

Stafford debt

levels does not

necessarily mean

that students and

families are

curbing their

use of aeditInstead,

bonowers could

be shiftingpart

of their

borrowing

actMty to

nonfederal

loan sources.

Stafford loans is considered unlikely. Anumber of higher education groupsrecommended modest changes in annualStafford borrowing limits but did notaggressively lobby for them. One proposal,supported by advocates for private colleges

and universities, sought to increase the

annual borrowing limits for undergraduates

but not the $23,000 aggregate Stafford limit

for dependent undergraduates. At least oneorganization urged Congress to grantschools the authority to set lower limits fortheir students.27Thus, absent a significantincrease in the number of borrowers, growth

in annual Stafford loan volume over the next

few years is less likely to repeat the hugeincreases that occurred in the mid-1990s.

To be sure, loan limits are not the onlyfactor affecting growth in Stafford

indebtedness. As noted earlier, an increasein the college drop-out rate could reduceaverage loan balances. Freshman borrowingis limited to $2,625 a year (for dependentstudents), so a significant increase in "one-

semester wonders" would exert downwardpressure on average Stafford debt levels.Then, too, other factors may curb demandfor Federal Stafford loans. Increases in theavailability of other aid for example,increases in Pell Grant awards and use ofHope Scholarship tax credits couldreduce student loan amounts.

Other factors at work could encourageStafford borrowing. The restoration of thestudent loan interest deduction, whichtook effect at the beginning of the 1998federal tax year, could make Stafford loans a

more attractive means of finding college.

Continued hikes in college tuition androom and board charges could increasepressure on students, especially those whoare financially independent of theirparents, to increase their borrowing underthe unsubsidized Stafford loan program.

Readers must be cautioned, however,that a slowdown in the growth rate foraverage Stafford debt levels does notnecessarily mean that students and families

Chart II-1

Annual Percentage Growth Rates in Average Stafford Balances Principal Only

Undergraduate

Proprietary

Community College

Undergraduate

7.61996

1997

II 1998

29.4

41.6

Source: USA Group Loan Services, Ina/USA Group, Inc.

--,

Chart 11-2

Annual Percentage Growth Rates in Average Stafford Balances Including Interest

Undergraduate

Proprietary

Community College

Undergraduate

12.3

8.8

3 8

1 8.8

I 4 5

1 1

1996

1997

11 1998

31.5

44.0

Source: USA Group Loan Services, Inc.IUSA Group, Inc.

are curbing their use of credit. Instead,borrowers could be shifting part of theirborrowing activity to nonfederal loansources, including state loan programs,private loans offered by banks, savings

institutions, secondary markets,educational institutions, and theubiquitous credit card. Indeed, theproliferation of private loan programs inrecent years indicates that many lendersview the current Stafford loan limitscoupled with continued increases in college

costs as a lending opportunity.How many students "max out" under

the Stafford limits and yet still needadditional loan funds is unknown. Unmetborrowing needs could be offset, at least inpart, by increased borrowing by parentsunder the PLUS program, which has seen asignificant increase in annual loan volumein the past few years. The College BoardTrends report shows that PLUS volume

grew at an average annual rate of morethan 20 percent during the 1993-94,1994-95, 1995-96 and 1996-97 financialaid award years. The available informationcompiled by The College Board showsthat borrowing under state-sponsored loanprograms rose by 28 percent duringfinancial aid award year 1996-97, to $302million. During the same period, lendingby major private loan programs rose 21.4percent to $1.2 billion.28 An increase inthe number of borrowers who reach theStafford loan limits but still have unmetfinancing need would boost the growthrate in private loan volume.

V. Minimum Annual IncomeNeeded to Support Post-SchoolIndebtedness

Lenders generally recommend that aborrower's monthly student loanpayments should not exceed 8 percent of

ts

An increase in

the number of

borrowers who

reach the

Stafford

loan limits

but still have

unmet financing

need would

boost the growth

rate in private

loan volumne.

Income Levels Needed toSupport Average Stafford

Debt Levels

Lenders urge borrowers tolimit their student loan

payments to no more than8 percent of their incomes.

Graduate Students

Average Debt Burden

Monthly Payment

Minimum Annual Income

Needed to Meet 8% Rule

Undergraduate Students

Average Debt Burden

Monthly Payment



Community/2/3-Year

College Students

Average Debt Burden

Monthly Payment



$22,938

$ 278

$41,700

$ 9,830

$ 119

$17,850

$ 4,525

$ 55

$ 8,250

Proprietary School Students

Average Debt Burden

Monthly Payment



$ 7,997

$ 97

$14,550

1998 debt burden data include average

cumulative principal balance of Stafford

loans and accrued interest. Monthly

payment calculations assume a

constant interest rate of 8 percent over

a 10-year repayment period.

Source: USA Group Loan Services, Ina/

USA Group, Inc.

usAG roup Foundatiorc

the borrower's gross,or pre-tax, monthlyincome. At this level, the borrower shouldhave sufficient discretionary income tocover essential living expenses andmaintain other debt service forexample, payments on car loans and creditcards. Using a debt-to-income ratio of 8percent, a new college graduate wouldneed an annual income of at least $17,850to support the average undergraduateStafford debt load of $9,830, assuming aninterest rate of 8 percent, a standard, 10-year repayment period, and a monthlypayment of $119. A borrower with atypical graduate student debt load of$22,938 would need an annual income of$41,700 or more to stay within the 8percent guideline. Proprietary schoolstudents would have to earn $14,550 ayear to meet the 8 percent debt-to-incomeguideline for the average trade schooldebt of $7,997. The monthlyinstallment for the typical communitycollege Stafford debt burden is $55;keeping this payment within the 8 percentrule would require an annual income of atleast $8,250 a year.

According to several key employmentsurveys, the Class of 1998 is enjoying oneof the strongest job markets in recentmemory. In mid-1998, the nationalunemployment rate fell to its lowest levelssince 1970." Because today's advancingtechnologies favor employees with at leastsome college education, competition forskilled workers is pulling up startingsalaries for arts and science degree holdersas well as grads with engineering,

computer, business or technical degrees.According to a 1998 survey by theNational Association of Colleges andEmployers, starting pay averaged about$42,000 for undergraduates who majoredin computer science and $33,000 to$39,000 for business majors. Manystudents who pursued arts and sciencedegrees can expect to earn $25,000 to$30,000 in their first jobs."

Still, as shown in Table Series III in theAppendix, more heavily indebtedborrowers will need even higher incomesto comfortably manage their student loanpayments. For example, the averageStafford balance for undergraduates whoowe at least $25,000 is $33,733. To limitthe $409 monthly payment to 8 percent orless of gross income, a borrower wouldhave to earn more than $5,100 a month

or $61,350 a year.The income hurdle is much more

challenging for highly indebted borrowers,especially the 25 percent of graduatestudents who leave school owing $25,000or more. This group's average indebtedness(including accrued interest) in 1998 is$58,134. To repay this amount under thestandard repayment plan, the borrowerwould have to make monthly payments of$705 for 10 years. Based on the 8 percentincome guideline, the borrower wouldneed a gross, annual household income of$105,750 to support this payment.

Borrowers whose incomes aren't enoughto meet the 8 percent guideline can either(1) seek to reduce their monthly paymentsby extending their payback period orarranging graduated repayment terms or(2) allocate a larger percentage of theirincomes to student loan payments.

Borrowers can reduce the monthlypayment, typically, by arranging a

graduated repayment plan or extending therepayment period. Under current federalrules, borrowers can take 10 to 30 years torepay their loans, depending on theamount owed. For example, under aconsolidation loan carrying an interest rateof 8 percent, a borrower who owes$58,134 can more than double the lengthof the repayment period to 25 years,reduce the payment from $705 to $449,and drop the minimum annual incomeneeded to meet the 8 percent rule to$67,350.

Although reduced payment plans freediscretionary income for other uses, they

10

add significantly to repayment costs,because borrowers must pay interest on ahigher balance for a longer period of time.Taking 25 years to repay the $58,134balance cited in the example above wouldnearly triple the borrower's total interestcharges, to more than $76,000.

Whether the borrower can "bite thebullet" and allocate a bigger share ofdiscretionary income to the monthlystudent loan payment depends on theborrower's financial and householdcircumstances. A borrower with a goodincome but no dependents and little or noconsumer debt may decide that he or shecan afford to dedicate, say, 12 percent ofmonthly income to the student loanpayment. However, a borrower with amodest income, hefty child care expensesor large credit card balances may not beable to meet the 8 percent guideline.

Because different borrowers willexperience payment stress at varying debt-to-income ratios, the appendix to thisreport includes a set of tables showingincomes needed to support debt-to-income ratios of 5 percent to 15 percent.Reducing this ratio would appear to put less

strain on borrowers' pocketbooks. However,

if the monthly debt burden remainsconstant, reducing the debt-to-income ratio

means that borrowers must earn biggerincomes to meet the ratio. For example, agraduate student with $22,938 in schooldebts would need an annual income of$41,700 to support a $278 monthlypayment and not exceed a debt-to-incomeratio of 8 percent. Yet, to make sure thesame payment does not consume morethan 5 percent of income, the borrowerwould have to earn $66,720 a year.

Clearly, borrowers need to understandthe impact of student loan payments ontheir post-school budgets and lifestyles.USA Group uses a variety of means to

inform and counsel borrowers about theirrepayment options, including borrowercontact letters, consumer brochures, toll-

free customer hotlines, and loan counselingsoftware. USA Group's Internet site on the

World Wide Web (www.usagroup.com)offers comprehensive loan counselinginformation and interactive repaymentcalculators, as well as information on howmuch income is needed to support variouslevels of debt.

VI. Development of Payment StressIndicators

Although debt-to-income ratios helpborrowers gauge their ability to repay theirloans, lenders and loan servicers cannotdirectly monitor, in most instances,whether borrowers have sufficient incometo meet their student loan payments.Stafford loans typically are issued before a

borrower gets a full-time job, and, exceptin cases where the borrower requests therelatively new income-sensitive repaymentoption, borrowers are not required toprovide lenders with income data. Lendersalso will not have information on othereducation loans the borrower may havewith different lenders.

Lenders and loan servicers, however,

may be able to develop a number ofpayment stress indicators by trackingoperational data that can tell themwhether borrowers are having increasingdifficulty in meeting their monthly loanpayments. The USA Group study iscompiling data on several possibleindicators, including repayment planselection rates and portfolio delinquencyrates. A marked increase in thedelinquency rate and/or the number ofborrowers selecting a repayment plan that

offers a lower monthly payment than thestandard, 10-year repayment plan couldindicate that more borrowers findthemselves in need of payment relief.

Repayment Plan Selection RatesThe USA Group study is developing a

system for tracking repayment planselection rates for Stafford borrowers who

Although debt-

to-income ratios

help borrowers

gauge their

ability to

repay their

loans,

lenders and loan

servicers cannot

direcdy monitor,

in most

instances,

whether

borrowers have

sufficient income

to meet their

student loan

payments.


Repayment PlanSelection Rates

for Stafford BorrowersEntering Repayment

Though the standard, level payment

plan remains the payback option of

choice, the percentage of borrowers

selecting graduated repayment rose

nearly 28% during the past year.

RepaymentOption 1998 1997

Level Payment 91.01% 93.07%

Graduated 8.53% 6.68%

Income-Sensitive 0.45% 0.25%

100.00% 100.00%

These percentages reflect payment plan

selection rates for borrowers who

entered repayment during the 12-

month period ending June 30.

Percentages may not add to 100

percent due to rounding.


USA Group, Inc.

are just starting to repay their loans. Thisendeavor includes an analysis of repaymentplan selection rates for borrowers seeking

loan consolidation. Borrowers can extendtheir repayment periods by consolidatingtheir loans and, depending on interest ratelevels and the length of the extendedpayback period, reduce their monthlypayments by as much as 40 percent underthe standard, level-payment plan.

Consolidation borrowers can free evenmore discretionary income by selecting agraduated or income-sensitive repaymentplan.

The standard repayment, 10-year, equal-installment plan has long been therepayment plan of choice among borrowersserved by USA Group Loan Services. The

reliance on the standard plan can beattributed to several factors, including:

O Cost. Total payments, and thus totalinterest expenses, will be lowerunder the equal-installment planthan under a graduated orincome-sensitive repayment planwith the same payback period.

O Simplicity. Equal-installment plansoffer a predictable, less complicatedpayment schedule than those offeredunder the other two plans.

O Suitability. Before the mid-1990s,the majority of borrowers owedamounts that could be comfortablyrepaid under the standard plan; themonthly payments did not imposeexcessive burdens on their incomes.The flexible terms offered bygraduated or income-sensitiverepayment were not needed.

El Lack of awareness. Until recently,many borrowers simply may nothave been aware of their repaymentoptions.

Flexible repayment options are relativelynew. The income-sensitive repayment plandid not become widely available until the

mid-1990s after the Department ofEducation issued guidelines on howlenders were to implement the plan. Thegraduated payment option was introducedyears ago, but lenders were not required toinform borrowers of this option untilrelatively recently.

Today, information on repaymentoptions, including graduated repayment,income-sensitive repayment, andconsolidation, is widely available fromfinancial aid offices, lenders, loan servicers,

and guarantors. USA Group Loan Servicesand affiliates, for example, use a variety ofmeans to inform and counsel borrowersabout their repayment options, includingcounseling, brochures, software, customerservice hotlines, and an Internet site thatfeatures in-depth counseling informationand interactive repayment calculators.

Growing awareness might prompt morestudents who are in need of payment reliefto seek more flexible repayment terms.Thus, examining repayment plan selectionrates for borrowers entering repaymentmay help us gauge whether post-schooldebt burdens are imposing economichardship. As the table at the left shows, 91of every 100 borrowers who enteredrepayment during the 12-month periodending June 30, 1998, chose to repay theirloans under a level-repayment option. Incontrast, nearly nine of every 100 borrowersare repaying their education loans under thegraduated repayment plan. Just 45 of every10,000 borrowers served by USA GroupLoan Services have elected to tie theirpayments to their incomes under theincome-sensitive repayment option.

A comparison of these data against therepayment selection rates reported a yearearlier shows that the percentage ofborrowers using graduated repayment rosenearly 28 percent. The proportion usingthe income-sensitive repayment optionnearly doubled, but the results are scantpercentages that represent a few hundredborrowers.

. 7,.fr"'''

The selection rates for graduatedrepayment and income-sensitiverepayment are higher for consolidationloans that were issued and added to USAGroup Loan Services' portfolio in the 12-month period ending June 30, 1998. Asshown in the table at right, slightly morethan 18 percent of these loans enteredrepayment under the graduated repaymentplan. Still, only 0.51 percent of theseconsolidation borrowers chose income-sensitive repayment.

The higher selection rate for graduatedrepayment among consolidation borrowersis noteworthy. Many borrowers elect toconsolidate their education loans to reducetheir monthly payment by extending thepayback period from the standard 10 yearsto periods ranging from 12 to 30 years.Depending on the interest rate and lengthof the payback period, a level-paymentconsolidation loan can reduce the monthlypayment by 10 to 40 percent from themonthly installment amount requiredunder the standard 10-year repaymentplan. A graduated or income-sensitive

payment plan can reduce the initialinstallment amount by 40 to 50 percent.An increasing percentage of consolidationborrowers who are seeking graduatedrepayment terms may serve as an indicatorof payment stress.

The available data do not permitcalculation of repayment plan selection rates

for borrowers entering repayment in prioryears. However, USA Group will be ableto track the selection rate in future years.

Repayment Status andDelinquency Rates

Lenders traditionally have usedpayment delinquency rates to measure andhelp manage potential losses on theirportfolios of home mortgages and creditcard accounts. For example, the MortgageBankers Association of America conductsand publishes a quarterly survey ofresidential mortgage delinquency rates; thesurvey, which covers approximately one-third of all residential mortgages, estimatesthe percentage of homeowners whosepayments are 30, 60, or 90 days overdue.31

100%

80%

60%

40%

20%

0%

Chart III-1

Repayment/Delinquency Status of Borrowers

Subsidized Stafford Loans June 1995 through June 1998

2ndQ'95 3rdT95 lthO'95 IstQ'96 2ndO'96 3rd096 lthQ'96

60+ Days Delinquent

7, Deferment

Ist0'97 2ndO'97 3rd0'97 4thQ'97 lstO'98 2ndO'913

30-9 Days Delinquent

Repayment

E1 Forbearance

NOTE: This chart reflects payment status for all Subsidized Stafford borrowers whose accounts areserviced by USA Group Loan Services and who are no longer in school or the six-month grace period.

Source: USA Group Loan Services, InnIUSA Group, Inc.

Repayment PlanSelection Rates

Federal forConsolidation Loans

Repayment

Option 1998 1997

Level Payment 81.46% 83.39%

Graduated 18.03% 16.23%

Income-Sensitive 0.51% 0.37%

100.00% 100.00%

These percentages reflect payment plan

selection rates for borrowers who

arranged consolidation loans between

July 1 and June 30. Percentages may

not add to 100 percent due to rounding.


USA Group, Inc.

19

OPYAVAILABLE

The percentage

of borrowers

especially

borrowers with

unsubsidized

Stafforcl

loans

who are in active

repayment has

been trending

downward.

USA Group has begun work on arepayment status series that tracksdelinquency rates for Stafford borrowersand monitors the use of deferment andforbearance benefits, which are unique tothe federal student loan programs. Theserates, which are calculated as percentages,are based on the number of Staffordborrowers who have entered therepayment phase of their loans. By mid-1998, the study had tracked repaymentstatus on an end-of-quarter basis over athree-year period (second quarter 1995through second quarter 1998).

Two different sets of rates have beencalculated, one for borrowers withsubsidized Stafford loans and another forborrowers with unsubsidized Staffordloans. (These are not mutually exclusivegroups.) Borrowers who are in school orthe post-school grace period are notincluded. These borrowers have not yetbegun to repay their loans and, in effect,cannot be deemed delinquent.

The USA Group study also examinedthe severity of delinquency by establishing

individual (and mutually exclusive)delinquency rates for borrowers who are atleast 30, 60, 90, 120, or 150 days overdue.

Based on the findings shown in theCharts III-1, 111-2, 111-3 and 111-4, gross

delinquency rates for both subsidized andunsubsidized Stafford borrowers have beenfollowing an uneven, downward coursesince mid-1995. This fact does notnecessarily suggest that fewer borrowers are

experiencing payment stress, because, overthe same period, the percentage ofborrowers especially borrowers withunsubsidized Stafford loans who are inactive repayment has also been trendingdownward. Offsetting these declines is anincreased reliance on forbearance.

Greater use of forbearance could be asign that a growing number of borrowersare unable to meet their student loanpayments and are trying to postpone them.Still, to some extent, the rising forbearancerate may reflect the efforts of USA Group'sdefault prevention staff to help delinquentborrowers return to a satisfactory paymentstatus. In other words, we may not be

Chart 111-2

Repayment/Delinquency Status of Borrowers

Unsubsidized Stafford Loans June 1995 through June 1998

100%

80%

60% -

40% -

20% -

0%2nd0'95 3rd(195 lthO'95 Is81'96 2nd096 3rd0'96 4thO'96 1s8-197 2nd(l97 3rdQ'97 4th091

60+ Days Delinquent

Forbearance

30-9 Days Delinquent

Repayment

I

1098 2ndQ'98

Deferment

NOTE: This chart reflects payment status for all Unsubsidized Stafford borrowers whose accounts are

serviced by USA Group Loan Services and who are no longer in school or the six-month grace period.Source: USA Group Loan Services, Inn/USA Group, Inc.

'a

Greater use of

forbearance

could be a sign

that a growing

nUmber of

borrowers

ate unable to

meet their

student loan

payments

and are flying to

postpone them. !

Unsubsidized

200,000

150,000

100,000

50,000

NOTE:serviced

Percent of

20%

15%

10%

5%

0%2nd0'95

NOTE:Loan

Repayment/Delinquency

02nc10'95

Stafford

Thisby USA

ard0'95

60+

Forbearance

Repayment

chart reflects

Group

Delinquency

Borrowers

Chart 111-3

Status of Borrowers

Stafford loans June 1995 through June 1998

4thll'95 ist0'96 2110'96 3rdlr96 4th0'96 Ist0'97 2nd0'97 3rd0'97 4th0'97 10098 2nd0'98

Days Delinquent 309 Days Delinquent

0 Deferment

payment status for all Unsubsidized Stafford borrowers whose accountsLoan Services and who are no longer in school or the six-month grace

Source: USA Group Loan Services, Inc.IUSA Group,

Chart 111-4

Status of Borrowers

Whose Payments Are At Least 30 Days Overdue

';ii

are

period.

Inc.

Inc.

....,.

J

usAGroup Foundation-

7300.95 460'95

DelinquencyServices and who

1st0'96 2nd0'96 30096 4th0'96 Ist0'97 20017 3rdlY97 4th0'97 100'911 2nd018

Unsubsidized Subsidized

rates are for all Stafford borrowers whose accounts are serviced by USA Group

are no longer in school or the six-month grace period.Source: USA Group Loan Services, InnIUSA Group,

`- f

Fewer than 59

percent of

borrowers with

unsubsidized

&affords

are in

repayment,

compared with

about 65 percent

of their

subsidized

Srn fford

counteTarts.


seeing an increase in distressed borrowersbut an increase in distressed borrowers whoare being successfully counseled.

Structural reasons may help explain theapparent shift of unsubsidized Staffordborrowers from active repayment status toforbearance. Unsubsidized Stafford loansare relatively new, and many of the firstcustomers, especially those who attendedgraduate or professional school, have justrecently begun to enter repayment.Moreover, program changes haveeliminated a number of defermentcategories, including one that permittedmedical students to defer their loanpayments during their medical residency,which can last up to five years; many ofthese borrowers must now use forbearanceto delay the repayment of their loans.

Borrowers with unsubsidized Staffordloans, which are not need-based, are morelikely to be in forbearance than thesubsidized Stafford group. Indeed, nearlyone of five post-grace, unsubsidized

Stafford borrowers was in forbearance atthe end of September 1997. In contrast,only 14 percent of borrowers withsubsidized Stafford loans were inforbearance. As a result, fewer than 59percent of borrowers with unsubsidizedStaffords are in repayment, compared withabout 65 percent of their subsidizedStafford counterparts.

It should be noted that the unsubsidizedStafford program did not exist prior to July1994. The increase in forbearance amongunsubsidized borrowers coincides withthe rapid increase in Staffordindebtedness during the middle of thisdecade. Although the available data arenot sufficient to determine whether theseborrowers are truly experiencing paymentstress, it can be argued that many recentborrowers are using forbearance as a debt-management tool.

;'76%,

Conclusions andRecommendations

SA Group's indebtedness

research clearly shows

that students are going deeperinto debt to finance theirpostsecondary education.Graduate students haveshown the greatest willingness

to borrow under the Staffordloan program.

Indebtedness is also rising for students

attending community colleges and othertwo-year institutions and proprietaryschools.

A marked slowdown in the growth rateof Stafford indebtedness may reflect thepresence of annual and aggregateborrowing limits for undergraduates andgraduate students and/or an increased usein other credit sources, includinginstitutional loans, private bank loans andcredit cards. Because Stafford limits are notexpected to increase in the next few years,the pace of borrrowing may continue toslow. Other forces at work, including PellGrant increases, the introduction ofeducation tax credits, and the wideningavailability of private loans, may curb growth

in demand for federal loans. Conversely,

lower interest rates for new Stafford loans

and restoration of the interest deductionfor student debt may prompt some studentsto borrow even more. By continuing to

monitor changes in average Staffordindebtedness, USA Group can assist theresearch community in gauging the impactof Stafford loan limits and other factorsaffecting student borrowing trends.

The concentration of heavily indebtedborrowers is growing. At present, nearlythree out of 10 graduate students canexpect to leave school with at least$25,000 in Stafford loans. The averagedebt burden for this group is pushing$60,000. -

Higher indebtedness means biggermonthly payments to lenders. Althoughthe vast majority of Stafford borrowerswho have recently entered repayment arecontinuing to rely on the standard, 10-yearrepayment plan, the percentage seeking toreduce their monthly payments byselecting graduated or income-sensitiverepayment terms has shown a markedincrease during the past year.

Also noteworthy is the fact that 18percent of borrowers who recentlyarranged consolidation loans selectedreduced-payment plans, compared with 9percent of nonconsolidated Staffordborrowers. This is a significant difference,especially in light of the fact that theprimary reason to consolidate is to reducethe monthly payment burden by extendingthe repayment period. When borrowersconsolidate their loans, they are making aconscious decision to accept a substantialincrease in interest expense as a trade-offfor more discretionary income now.Interest expenses will be even greater for

those choosing graduated or income-sensitive repayment. Further increases inthe selection rate for graduated repaymentamong consolidation borrowers couldserve as an indicator of payment stress.

The growing ranks of heavily indebtedborrowers, especially among graduatestudents, underscores a need for moretargeted loan counseling services andmaterials. Many existing consumerbrochures and counseling programs aregeared to the needs of undergraduateborrowers. But money management issuesare likely to be considerably more complexfor graduate students who leave schoolowing house-size Stafford debts. In

addition, given the growing reliance onunsubsidized Stafford loans, today'sborrowers would be well served by moreinformation on how to minimize theinterest accrual on these debts.

A reduction in delinquency rates at firstappears to offer evidence that borrowersare not having trouble paying their loansdespite the increase in indebtedness. Yet,the percentage of borrowers in activerepayment has also drifted downwardsince mid-1995. A closer look at USAGroup's portfolio of post-grace Staffordborrowers reveals that the decline in thedelinquency and repayment rates has beenoffset primarily by an increase in the use offorbearance. This trend may reflect agrowing incidence of payment stressamong borrowers and thus warrantscontinued monitoring.

Given the size and geographic reach ofUSA Group Loan Services, it may bepossible to develop regional delinquencyrates. Future research projects may alsoattempt to develop delinquency rates bytype of institution last attended by theborrower.

Other possible payment stress indicatorsinclude the percentage of borrowers whorequest deferment or forbearanceespecially for economic hardship in theearly years of their repayment periods.Such a measure would provide valuableinformation about the ability of borrowercohorts to meet their student loanpayments. Because of the complex rulesgoverning eligibility for deferment andforbearance, care must be taken toestablish a consistent mechanism forreporting requests for deferment andforbearance. At this writing, the USAGroup Foundation is sponsoring researchon the use and outcomes of forbearance.The study is based on a large sample ofborrowers whose accounts are serviced byUSA Group Loan Services.

The growing

ranks of heavily

indebted

borrowers,

especially

amonggraduate

students,

underscores a

need for more

targeted loan

counseling

services and

materials.

23

2 4

c;i

Akt.

Ogt

usAGroup Foundation'

Endnotes

1. "Student Loan Default Rates Continue Downward Trend," U.S. Department of Education, November12, 1997; "National Student Loan Default Rate at Lowest Point Ever," U.S. Department of Education,January 9, 1997; "Credit Management/Debt Collection," Financial Management Status Report, U.S.Department of Education, October 1996.

2. Office of Postsecondary Education (OPE), U.S. Department of Education, Federal Student Loan

Programs Data Book for Fiscal Years 1994-1996, pp. 25-28; FY1997 volume reports for Federal Family

Education Loan Program and Federal Direct Loan Program. Data are available from the OPE Internet

site at: www.ed.gov/offices/OPE/PPI/loanvol.html. Please note that the average balance for guaranteed

loans issued under the FFELP has been steadily rising. The average amount for direct loans fell from

FY1994 to FY1996; this decline may reflect the changing mix of Direct Lending schools and borrowers

during the initial years of this program.

3. National Postsecondary Student Aid Study 1995-96, Methodology Report, National Center forEducation Statistics, U.S. Department of Education, 1997.

4. See, for example: National Student Loan Survey 97, Nellie Mae, October, 1997; Debt Burden: The

Next Generation, Final Report, U.S. Department of Education, September 1993; The Characteristics of

Student Borrowers in Repayment and the Impact of Educational Debt, Joseph Boyd and Carol

Wennerdahl, American Council on Education, 1993; Student Borrowing. How Much Is Too Much?,Fred

J. Galloway and Terry Hartle, American Council on Education, 1994.

5. Susan P. Choy, Sonya Geis, and C. Dennis Carroll, Early Labor Force Experiences and Debt Burden,

National Center for Education Statistics, U.S. Department of Education, July 1997. This report isbased on data from the Baccalaureate and Beyond Study, which was derived from the 1992-93 NPSAS

data set, and the Beginning Postsecondary Student Longitudinal Study, which was derived from the 1989-

90 NPSAS survey.

6. National Postsecondary Student Aid Study 1995-96, Methodology Report, p. 1-1.

7. Jacqueline King, Crisis or Conveniencel New Information on Undergraduate Borrowing, AmericanCouncil on Education, 1997; New Information on Student Borrowing, a policy brief published by theAmerican Council on Education, October 1997.

8. American Association of Medical Colleges, "Medical Student Educational Loan Debt," available via the

AAMC Internet site at: www.aamc.org/stuapps/finaid/medloans/debtman/debt.htm.

9. Trends in Student Aid.. 1987 to 1997, The College Board, September 1997, p. 3.

10. Fact Sheet, National Student Loan Survey '97, Nellie Mae, October 1997, pp. 14-15.

11. Credit Risk or Credit Worthy? College Students and Credit Cards, The Education Resources Institute and

the Institute for Higher Education Policy, June 1998, pp. 9-11.

12. Keith Greiner, "How Much Student Loan Debt is Too Much?," Journal of Student Financial Aid,Winter 1996, pp. 8-12.

13. Borrowers are only required to provide income data when they select the income-sensitive or income

contingent repayment plan.

14. Lender clients include 12 secondary markets for student loans.

15. Trends in Student Aid: 1987 to 1997, p. 6.

. ,

16. Trends in Stuile'rii-Aidi '1987 to1997;.p.'6.

2 7

17. Patricia M. Scherschel and Paul E. Behymer, Reality Bites: How Much Do Students Owe?, USA Group,

Fall 1997.

18. SLS loans are unsubsidized loans issued under the Supplementary Loans for Students program, whichwas discontinued in 1994. SLS loans were replaced by unsubsidizedStafford loans.


20. FY1997 Loan Volume Updates, Office of Postsecondary Education, U.S. Department of Education.

21. Student Loan Guide, 1998-99, U.S. Department of Education; this guide is available via the following

Internet address: www.ed.gov/prog_info/ SFA/StudentGuide.

22. Federal rules state that borrowers who turn 24 by December 31 of the award year are automaticallyclassified as independent students. According to federal statistics for 1995, nearly half (49 percent) ofthe students (full-time and part-time) enrolled at community colleges and other two-year schools were25 or older, compared with 38 percent for four-year schools. See Table 176, Digest of Education Statistics1997, National Center for Education Statistics (NCES), U.S. Department of Education. Also,according to another recent NCES report, both dependent and independent undergraduates attendingprivate, for-profit institutions in 1995-96 were much more likely to receive federal financial aid (grantsand/or loans), than students attending public and private, not-for private schools. See Laura J. Hornand Jennifer Berktold, Profile of Undergraduates in US. Postsecondary Education Institutions 1995-96,

NCES, May 1998, pp. 115-116.

23. Federal Student Loan Programs Data Book, FYI 994-FY1996, pp. 29-34.

24. Laura Greene Knapp and Terry G. Seaks, "An Analysis of the Probability of Default on FederallyGuaranteed Student Loans," The Review of Economics and Statistics, August 1992, p. 408.

25. Fact Sheet, National Student Loan Survey '97, Nellie Mae, October 1997, pp. 14-15.

26. Operations Bulletin, USA Group Loan Services, February 1998, pp. 2-3.

27. Compilation of Title IV Reauthorization Recommendations, an informal briefing document prepared by

the Advisory Committee on Student Financial Assistance, July 1997.


29. "Unemployment Rate Civilian Labor Force," Labor Force Statistics from the current Population Survey,

Bureau of Labor Statistics, U.S. Department of Labor. This data series is available from the BOLs

Internet site at stats.bls.gov:80.

30. See the following news releases from the National Association of Colleges and Employers, based inBethlehem, PA: "New Graduates Enjoy Healthy Increase in Starting Salaries," July 6, 1998, andEmployers Forecast Outstanding Job Market for New College Grads," November 19, 1997.

31. See, for example, "Mortgage Delinquency Rates Down in Second Quarter," news release, MortgageBankers Association of America, Washington, D.C., September 9, 1998.

BEST COPY AVAILABLE

53

USAG CO up Foundation"

Data Limitations

At present, the USA Group study isrestricted to subsidized and unsubsidizedStafford loan balances; the debt burdenestimates do not include other types ofguaranteed loans issued under the FederalFamily Education Loan Program (FFELP).

The focus on Stafford loans reflects, inpart, the complexities of determiningcumulative debt burdens of SLS (andPLUS) borrowers. Stafford loans issued

under the Federal Direct Loan Program

(FDLP) are not included. USA Group LoanServices does not compile any information

regarding Perkins loans, which are adminis-tered by schools. USA Group Loan Services

does administer private loan programs, butthese loans are not included in the survey.

At this time, the study cannot providebreakdowns for borrowers attending publicinstitutions vs. those attending privateschools. Nor can it differentiate betweenborrowers who completed their degree orcertificate programs and those who didnot. An analysis of these factors is plannedfor a later phase of this project. The studycannot take into account education loansnot serviced by USA Group Loan Services.

Estimates for cumulative Stafford borrowing

by graduate students may be understated tothe extent that these borrowers repaid anyof their undergraduate debts beforeentering graduate school.

Because the USA Group study is basedon virtually its entire loan servicing portfolio,

the results are not subject to samplingerror, at least as they pertain to USA

Group's customer base. Thus, the resultsshould prove useful in identifying ways tobetter meet borrowers' loan counselingneeds. Although the USA Group portfolio

may not perfectly represent the entireuniverse of student loans, the study mayprovide a useful proxy for a national

estimate of post-school debt burdens andsuggest a framework for monitoring theability of Stafford borrowers to repay theireducation debts.

Methodology/Database DesignCare has been taken to establish reliable

data and eliminate inconsistent data.Preliminary statistical compilationsconducted in mid-1997 indicated that asmall but significant percentage ofgraduate students were wrongly classifiedas undergraduates. The misclassificationhad the effect of increasing both average

undergraduate indebtedness and averagegraduate debt loads. The skewing of thelatter reflects the migration of lower-balance graduate debts into theundergraduate ranks.

Because the number of borrowers inquestion was proportionately small, stepswere taken to "scrub," or remove, therecords of wrongly coded students fromthe database. The scrubbing method was

designed to ensure the comparability ofthe annual borrower cohorts. This process,however, necessarily reduced the size of the1995, 1996, and 1997 borrower cohortsby approximately 3 to 6 percent.

As a result of the data "scrubbing," pre-1998 estimates of the average indebtednessfor undergraduate and graduate borrowershave been revised downward from the

preliminary estimates released in mid- 1997.The revisions also reduced the percentages

of undergraduate borrowers classified asowing $25,000 or more. The distributionof borrowers owing less than $25,000 wasalso revised, but to a much lesser extent.

In addition, the study no longer reportsaverage indebtedness data forconsolidation loans by type of repaymentplan because of the complexity incapturing this information. Inconsistencyin results from year to year suggest that the

1997 data reported last year were invalid.In addition, loan balance amounts canactually grow during the first 180 daysafter consolidation loans are bookedbecause borrowers may addunconsolidated loans during this period.A more effective means of estimatingconsolidation balances is being explored.

About the AuthorPatricia M. Scherschel is director of policy research and consumer issues

at USA Group, Inc.

About USA Group, Inc.A nonprofit holding company headquartered in Indianapolis, USA

Group is one of the nation's largest financial and information servicescompanies serving education. Through its affiliates, USA Groupguarantees or otherwise administers more than $9 billion in student loansannually and currently services, on behalf of 150 lenders, a multi-billion-dollar portfolio of education loans to more than one million borrowers.USA Group affiliates also offer a wide range of financial and managementconsulting services designed to help students and families navigate thefinancial aid process.

For Your InformationUSA Group welcomes readers' comments and questions about this

report. Additional copies of this paper are available upon request. Pleasecontact or address any correspondence to:


Director, Policy Research and Consumer IssuesTel: (317) 951-5491

Fax: (317) 951-5499

E-mail: [email protected]

Tab

le 1

.1: A

vera

ge C

umul

ativ

e S

taffo

rd B

orro

win

g by

Gra

duat

e S

tude

nts

The

ave

rage

cum

ulat

ive

Staf

ford

pri

ncip

al b

alan

ce f

or

grad

uate

bor

row

ers

who

left

scho

ol in

the

firs

t hal

f of

1998

is e

stim

ated

to b

e ab

out

$21,

700,

and

mor

e th

an

25%

ow

e $2

5,00

0 or

mor

e.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epay

men

t Per

iod

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$21,

698

$19,

568

$15,

934

$11,

256

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

10.9

%+

22.8

%+

41.6

%

IBor

row

ers

Who

Ow

e:

Les

s th

an $

5,00

019

.4%

22.1

%23

.7%

28.4

%$

2,81

6$

2,70

0$

2,73

7$

2,69

8$5

,000

$9,9

9922

.3%

22.4

%24

.2%

29.0

%$

6,99

4$

7,11

0$

7,11

9$

7,14

1

$10,

000

- $1

4,99

913

.5%

14.4

%15

.3%

18.1

%$1

2,03

5$1

2,07

2$1

2,22

5$1

2,12

3

$15,

000

- $1

9,99

914

.1%

13.1

%13

.2%

10.7

%$1

7,37

2$1

7,41

6$1

7,27

6$1

6,97

6

$20,

000

$24,

999

4.6%

4.4%

4.8%

3.9%

$22,

229

$22,

282

$22,

352

$22,

360

$25,

000

or m

ore

26.2

%23

.6%

18.8

%9.

9%$5

5,43

5$5

2,41

9$4

4,28

4$3

5,64

6

NO

TE

:A

ccru

ed (

but-

not-

yet-

capi

taliz

ed)

inte

rest

is n

ot in

clud

ed. A

ccru

ed in

tere

st w

ill b

e ad

ded

to p

rinc

ipal

bal

ance

at s

tart

of

repa

ymen

t. L

oan

bala

nces

incl

ude

Staf

ford

loan

s us

ed to

fun

d un

derg

radu

ate

stud

ies.

Per

cent

ages

may

not

add

to 1

00 d

ue to

rou

ndin

g.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

C T=

.11

C)

.

0--s = -0 31 0 = co'

,,. 0T

able

12:

Ave

rage

Cum

ulat

ive

Sta

fford

Bor

row

ing

by U

nder

grad

uate

Stu

dent

s.

.

The

aver

age

cum

ulat

ive

Staf

ford

pri

ncip

al b

alan

ce f

orun

derg

radu

ate

borr

ower

s w

ho

left

sch

ool i

n th

e fi

rst h

alf

of19

98 is

est

imat

ed to

be

near

ly

$9,5

00, a

nd m

ore

than

one

thir

d ow

e le

ss th

an $

5,00

0.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epay

men

t Per

iod

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$9,4

84$9

,448

$9,1

15$8

,473

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

0.4%

+3.

7%+

7.6%

-B

orro

wer

s W

ho O

we:

Les

s th

an $

5,00

035

.7%

34.0

%32

.9%

35.6

%$

2,66

2$

2,71

3$

2,71

4$

2,65

0

$5,0

00 -

$9,

999

27.2

%29

.0%

31.1

%30

.9%

$ 6,

875

$ 6,

891

$ 6,

954

$ 7,

013

$10,

000

- $1

4,99

915

.6%

16.2

%17

.6%

17.8

%$1

2,07

7$1

2,11

6$1

2,10

9$1

2,10

8

$15,

000

- $1

9,99

911

.9%

11.5

%10

.6%

9.8%

$17,

165

$17,

155

$17,

080

$16,

847

$20,

000

- $2

4,99

93.

9%4.

0%3.

4%2.

9%$2

2,09

0$2

2,15

1$2

2,14

0$2

2,09

8

$25,

000

or m

ore

5.7%

5.3%

4.3%

3.0%

$32,

807

$32,

392

$31,

215

$31,

025

NO

TE

:A

ccru

ed (

but-

not-

-yet

-cap

italiz

ed)

inte

rest

is n

ot in

clud

ed. A

ccru

ed in

tere

st w

ill b

e ad

ded

to p

rinc

ipal

bal

ance

at s

tart

of

repa

ymen

t.Pe

rcen

tage

s m

ay n

ot a

dd to

100

due

to r

ound

ing.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

(--I

"I A

35

MI

sM,

Tab

le 1

3: A

vera

ge C

umul

ativ

e S

taffo

rdB

orro

win

g by

Stu

dent

s A

ttend

ing

Tw

o-Y

ear

Col

lege

s

The

aver

age

cum

ulat

ive

Staf

ford

pri

ncip

al b

alan

cefo

r bo

rrow

ers

who

left

com

mun

ity c

olle

ge o

r tw

o-

year

or

thre

e-ye

ar s

choo

ls

duri

ng th

e fi

rst h

alf

of19

98 is

est

imat

ed to

be

abou

t $4,

400.

Tw

o-th

irds

owe

less

than

$5,

000.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epor

ting

Peri

od

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$4,3

74$4

,251

$3,9

24$3

,532

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

2.9%

+8.

3%+

11.1

%-

Bor

row

ers

Who

Ow

e:

Les

s th

an $

5,00

066

.9%

67.4

%71

.6%

74.9

%$

2,45

2$

2,47

6$

2,43

3$

2,37

7

$5,0

00 -

$9,

999

26.0

%26

.5%

23.6

%22

.8%

$ 6,

624

$ 6,

692

$ 6,

629

$ 6,

553

$10,

000

- $1

4,99

95.

1%4.

9%4.

2%2.

3%$1

2,15

0$1

2,12

6$1

2,13

6$1

1,02

8

$15,

000

- $1

9,99

91.

4%1.

0%0.

5%L

ess

than

0.1

%$1

7,16

5$1

6,69

1$1

6,62

5

$20,

000

- $2

4,99

90.

5%0.

2%0.

1%0%

$22,

007

$22,

121

$21,

487

$25,

000

or m

ore

0.1%

Les

s th

an 0

.1%

Les

s th

an 0

.1%

0%$2

8,74

3

NO

TE

:A

ccru

ed (

but-

not-

yet-

capi

taliz

ed)

inte

rest

is n

ot in

clud

ed. A

ccru

ed in

tere

st w

ill b

e ad

ded

to p

rinc

ipal

bal

ance

at s

tart

of

repa

ymen

t.D

ata

incl

ude

stud

ents

atte

ndin

g th

ree-

year

sch

ools

. Per

cent

ages

may

not

add

to 1

00 d

ue to

rou

ndin

g.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

, CL

.

Cn > G,

=5.

eL.

0 m

, i.

:.

..-

Tab

le 1

.4: A

vera

ge C

umul

ativ

e S

taffo

rdB

orro

win

gby

Pro

prie

tary

Sch

ool S

tude

nts

The

ave

rage

cum

ulat

ive

Staf

ford

pri

ncip

al b

alan

ce

for

borr

ower

s w

ho le

ft

prop

riet

aty

scho

ol d

urin

g th

e

firs

t hal

f of

199

8 is

est

imat

ed

to b

e ab

out $

7,70

0. M

ore

than

42%

ow

e le

ss th

an

$5,0

00.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epor

ting

Peri

od

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$7,7

10$7

,122

$6,4

44$4

,981

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

8.3%

+10

.5%

+29

.4%

1

Bor

row

ers

Who

Ow

e:

Less

than

$5,

000

42.4

%43

.6%

47.2

%57

.7%

$ 2,

613

$ 2,

642

$ 2,

692

$ 2,

666

$5,0

00$9

,999

30.1

%32

.7%

32.3

%34

.1%

$ 7,

262

$ 7,

151

$ 7,

127

$ 6,

962

$10,

000

$14,

999

15.4

%14

.2%

15.6

%6.

4%$1

2,49

1$1

2,55

0$1

2,54

3$1

1,35

3

$15,

000

$19,

999

8.1%

6.6%

3.5%

1.4%

$17,

469

$17,

376

$17,

105

$17,

041

$20,

000

$24,

999

2.2%

1.9%

1.0%

0.4%

$22,

295

$21,

935

$21,

565

$21,

726

$25,

000

or m

ore

1.8%

0.9%

0.3%

0.1%

$32,

765

$30,

207

$29,

036

$39,

460

NO

TE

:A

ccru

ed (

but-

not-

yet-

capi

taliz

ed)

inte

rest

is n

ot in

clud

ed. A

ccru

ed in

tere

st w

ill b

e ad

ded

to p

rinc

ipal

bal

ance

at s

tart

of

repa

ymen

t.Pe

rcen

tage

s m

ay n

ot a

dd to

100

due

to r

ound

ing.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

-

m

G,

....

.

,_.

saT

able

11.

1: A

vera

ge C

umul

ativ

e T

otal

Sta

fford

Loan

Bal

ance

s fo

r G

radu

ate

Stu

dent

s._

.

The

ave

rage

tota

l Sta

ffor

d

loan

bal

ance

, inc

ludi

ng

prin

cipa

l and

acc

rued

inte

rest

, for

gra

duat

e

borr

ower

s w

ho le

ft s

choo

l in

the

firs

t hal

f of

199

8 is

abo

ut

$22,

900.

Mor

e th

an o

ne-

four

th b

orro

w $

25,0

00 o

rm

ore;

stil

l, 41

% o

we

less

than

$10

,000

.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epor

ting

Peri

od

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$22,

938

$20,

457

$16,

357

$11,

359

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

12.1

%+

25.1

%+

44.0

%

Bor

row

ers

Who

Ow

e:

Les

s th

an $

5,00

019

.0%

21.8

%23

.5%

28.3

%$

2,85

4$

2,72

2$

2,75

4$

2,70

8

$5,0

00$9

,999

22.0

%21

.8%

23.9

%28

.9%

$ 7,

055

$ 7,

143

$ 7,

172

$ 7,

181

$10,

000

$14,

999

13.3

%14

.3%

15.2

%18

.0%

$12,

121

$12,

140

$12,

310

$12,

164

$15,

000

- $1

9,99

913

.2%

12.8

%13

.3%

10.9

%$1

7,58

9$1

7,58

4$1

7,48

2$1

7,07

7

$20,

000-

$24,

999

5.5%

5.0%

4.9%

3.9%

$22,

018

$22,

147

$22,

334

$22,

414

$25,

000

or m

ore

27.0

%24

.1%

19.3

%10

.0%

$58,

134

$54,

646

$45,

242

$35,

836

NO

TE

:A

ccru

ed in

tere

st is

incl

uded

but

will

not

be

capi

taliz

ed u

ntil

the

begi

nnin

g of

the

borr

ower

's r

epay

men

t per

iod

Perc

enta

ges

may

not

add

to 1

00 d

ue to

roun

ding

.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

41

t. ,: R

11.2

:A

vera

ge C

umul

ativ

eT

otal

Sta

fford

Loan

Bal

ance

s fo

r

..

Und

ergr

adua

te S

tude

nts

The

ave

rage

tota

l Sta

ffbr

d

loan

bal

ance

, inc

ludi

ng

prin

cipa

l and

acc

rued

inte

rest

, for

und

ergr

adua

te

borr

ower

s w

ho le

ft s

choo

l in

the

firs

t hal

f of

199

8, is

abou

t $9,

800,

but

one

-thi

rd

owe

less

than

$5,

000.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epor

ting

Peri

od

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$9,8

30$9

,723

$9,3

02$8

,551

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

1.1%

+4.

5%+

8.8%

Bor

row

ers

Who

Ow

e:

Les

s th

an $

5,00

035

.3%

33.7

%32

.6%

35.4

%$

2,71

3$

2,75

2$

2,73

3$

2,65

8

$5,0

00$9

,999

26.9

%28

.6%

30.8

%30

.8%

$ 6,

950

$ 6,

949

$ 6,

993

$ 7,

037

$10,

000

$14,

999

15.3

%16

.2%

17.5

%17

.9%

$12,

130

$12,

175

$12,

143

$12,

146

$15,

000

- $1

9,99

911

.8%

11.5

%11

.0%

9.9%

$17,

269

$17,

271

$17,

185

$16,

899

$20,

000

$24,

999

4.4%

4.3%

3.5%

2.9%

$22,

095

$22,

104

$22,

198

$22,

120

$25,

000

or m

ore

6.3%

5.8%

4.6%

3.0%

$33,

733

$33,

114

$31,

921

$31,

203

NO

TE

:A

ccru

ed in

tere

st is

incl

uded

but

will

not

be

capi

taliz

ed u

ntil

the

begi

nnin

g of

the

borr

ower

's r

epay

men

t per

iod.

Per

cent

ages

may

not

add

to 1

00 d

ue to

roun

ding

.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

5-e.

4

Tab

le 1

13: A

vera

ge C

umul

ativ

e T

otal

Sta

fford

Bor

row

ing

by S

tude

nts

Atte

ndin

g T

wo-

Yea

r C

olle

ges

-

The

ave

rage

tota

l Sta

ord

loan

bala

nce,

incl

udin

g pr

inci

pal

and

accr

ued

inte

rest

, fir

borr

ower

s w

ho le

ft c

omm

unity

colle

ges,

two-

year

sch

ools

, or

thre

e-ye

ar s

choo

ls d

urin

g th

e

firs

t hal

f of

199

8 is

est

imat

ed to

be a

bout

$4,

500.

Nea

rly

two-

thir

ds o

f th

ese

borr

ower

s ow

e

less

than

$5,

000.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epor

ting

Peri

od

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$4,5

25$4

,358

$4,0

04$3

,565

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

3.8%

+8.

8%+

12.3

%-

Bor

row

ers

Who

Ow

e:

Les

s th

an $

5,00

066

.2%

66.9

%71

.2%

74.6

%$

2,48

2$

2,50

0$

2,45

2$

2,38

7

$5,0

00 $

9,99

926

.0%

26.5

%23

.7%

22.9

%$

6,72

3$

6,76

0$

6,70

1$

6,58

9

$10,

000

$14,

999

5.3%

5.0%

4.4%

2.4%

$12,

304

$12,

199

$12,

276

$11,

136

$15,

000

$19,

999

1.6%

1.2%

0.7%

Les

s th

an 0

.1%

$17,

187

$16,

796

$16,

650

$20,

000

$24,

999

0.6%

0.2%

0.1%

0%$2

1,99

1$2

1,65

9$2

1,31

3

$25,

000

or m

ore

0.3%

0.1%

Les

s th

an 0

.1%

0%$2

8,80

0$2

6,79

1

NO

TE

:T

he a

ccru

ed in

tere

st is

incl

uded

but

will

not

be

capi

taliz

ed u

ntil

the

begi

nnin

g of

the

borr

ower

's r

epay

men

t per

iod.

Dat

a in

clud

e st

uden

ts a

ttend

ing

thre

e-ye

ar s

choo

ls. P

erce

ntag

es m

ay n

ot a

dd to

100

due

to r

ound

ing.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inc

./USA

Gro

up, I

nc.

4

. = = cm .,T

able

11.

4:A

vera

ge C

umul

ativ

e

_.--

*.

Tot

al S

taffo

rdfo

r P

ropr

ieta

ry S

choo

l Stu

dent

sLo

an B

alan

ces

The

ave

rage

tota

l Sta

ord

loan

bala

nce,

incl

udin

g pr

inci

pal

and

accr

ued

inte

rest

, for

prop

riet

ary

scho

ol b

orro

wer

s

who

lefi

sch

ool d

urin

g th

e fi

rst

half

of

1998

is e

stim

ated

to b

e

near

ly $

8,00

0. M

ore

than

70%

of

thes

e bo

rrow

ers

owe

less

than

$10

,000

.

Dis

trib

utio

n of

Bor

row

ers

Ent

erin

gSi

x-M

onth

, Pos

t-Sc

hool

Gra

ce P

erio

dD

urin

g R

epor

ting

Peri

od

Ave

rage

Sta

ffor

d L

oan

Bal

ance

upon

Ent

erin

gPo

st-S

choo

l Gra

ce P

erio

d

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

1/1/

98th

ru6/

30/9

8

1/1/

97th

ru6/

30/9

7

1/1/

96th

ru6/

30/9

6

1/1/

95th

ru6/

30/9

5

All

Bor

row

ers

100%

100%

100%

100%

$7,9

97$7

,364

$6,6

24$5

,037

% C

hang

e in

Ave

rage

Bal

ance

fro

m P

revi

ous

Yea

r:+

8.6%

+11

.2%

+31

.5%

Bor

row

ers

Who

Ow

e:

Les

s th

an $

5,00

041

.7%

42.8

%46

.5%

57.0

%$

2,61

9$

2,64

0$

2,69

8$

2,66

1

$5,0

00 -

$9,

999

29.4

%32

.2%

31.9

%34

.4%

$ 7,

267

$ 7,

169

$ 7,

157

$ 6,

963

$10,

000

$14,

999

15.7

%14

.5%

15.0

%6.

7%$1

2,56

2$1

2,63

9$1

2,53

9$1

1,38

3

$15,

000

$19,

999

7.5%

6.6%

4.9%

1.4%

$17,

342

$17,

354

$16,

761

$17,

022

$20,

000

- $2

4,99

93.

5%2.

8%1.

2%0.

4%$2

1,64

5$2

1,75

3$2

1,81

3$2

1,63

9

$25,

000

or m

ore

2.3%

1.2%

0.3%

0.1%

$33,

016

$30,

427

$29,

641

$38,

285

NO

TE

:T

he a

ccru

ed in

tere

st is

incl

uded

but

will

be

not c

apita

lized

unt

il th

e be

ginn

ing

of th

e bo

rrow

er's

rep

aym

ent p

erio

d. P

erce

ntag

es m

ay n

ot a

dd to

100

due

to r

ound

ing.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

, Inn

/USA

Gro

up, I

nc.

G.,

111

Tab

le 1

11.1

: Min

imum

Ann

ual I

ncom

e Le

vels

Nee

ded

to S

uppo

rt In

debt

edne

ssof

Gra

duat

e S

tude

nts/

Sta

ndar

d R

epay

men

t

Len

ders

rec

omm

end

that

stu

dent

loan

paym

ents

sho

uld

not e

xcee

d 8%

of

the

borr

ower

's m

onth

ly in

com

e. A

ssum

ing

anin

tere

st r

ate

of 8

%, t

he m

onth

ly p

aym

ent f

oran

ave

rage

Sta

ffor

d lo

an b

alan

ce o

f$22

,938

unde

r th

e st

anda

rd 1

0-ye

ar r

epay

men

t pla

nw

ould

be

$278

. The

bor

row

er w

ould

nee

dan

ann

ual i

ncom

e of

$41

,700

to m

eet t

he8%

deb

t-to

-inc

ome

ratio

.

Firs

t Hal

f of

199

8A

vera

ge P

ost-

Scho

ol D

ebt B

urde

nM

onth

ly P

aym

ent A

mou

ntA

nnua

l Inc

ome

Nee

ded

to M

eet 8

% R

ule

Firs

t Hal

f of

199

7

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

996

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

995

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

e

All

Gra

duat

e St

uden

ts W

ho L

eave

Sch

ool O

win

g:G

radu

ate

Stud

ents

Ent

erin

gL

ess

$5,0

00$1

0,00

0$1

5,00

0$2

0,00

0$2

5,00

0Po

st-S

econ

dary

than

toto

toto

orG

race

Per

iod

$5,0

00$9

,999

$14,

999

$19,

999

$24,

999

Mor

e

$22,

938

$2,8

54$

7,05

5$1

2,12

1$1

7,58

9$2

2,01

8$

58,1

34$

278

$50

$86

$14

7$

213

$26

7$

705

$41,

700

$7,5

00$1

2,90

0$2

2,05

0$3

1,95

0$4

0,05

0$1

05,7

50

$20,

457

$2,7

22$

7,14

3$1

2,14

0$1

7,58

4$2

2,14

7$5

4,64

6$

248

$50

$87

$14

7$

213

$26

9$

663

$37,

200

$7,5

00$1

3,05

0$2

2,05

0$3

1,95

0$4

0,35

0$9

9,45

0

$16,

357

$2,7

54$

7,17

2$1

2,31

0$1

7,48

2$2

2,33

4$4

5,24

2$

198

$50

$87

$14

9$

212

$27

1$

549

$29,

700

$7,5

00$1

3,05

0$2

2,35

0$3

1,80

0$4

0,65

0$8

2,35

0

$11,

359

$2,7

08$

7,18

1$1

2,16

4$1

7,07

7$2

2,41

4$3

5,83

6$

138

$50

$87

$14

8$

207

$27

2$

435

$20,

700

$7,5

00$1

3,05

0$2

2,20

0$3

1,05

0$4

0,80

0$6

5,25

0

NO

TE

:St

affo

rd lo

ans

char

ge a

var

iabl

e in

tere

st r

ate

that

is a

djus

ted

annu

ally

, sub

ject

to a

max

imum

rat

e of

8.2

5%. F

or c

alcu

latio

n pu

rpos

es, t

he in

tere

st r

ate

isas

sum

ed to

hol

d co

nsta

nt a

t 8%

. Sta

ffor

dbo

rrow

ers

are

requ

ired

to m

ake

min

imum

mon

thly

inst

allm

ents

of

$50;

thus

, sm

all-

dolla

r lo

an b

alan

ces

(les

s th

an $

4,20

0) w

ill b

e re

paid

in le

ss th

an 1

0 ye

ars.

Num

bers

are

rou

nded

to w

hole

dol

lars

.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

/USA

Gro

up, I

nc.

4

Tab

le 1

11.2

: Min

imum

Ann

ual I

ncom

e Le

vels

Nee

ded

toS

uppo

rt In

debt

edne

ssof

Und

ergr

adua

te S

tude

nts/

Sta

ndar

dR

epay

men

t

Len

ders

rec

omm

end

that

stu

dent

loan

paym

ents

sho

uld

not e

xcee

d 8%

of

the

borr

ower

's m

onth

ly in

com

e. A

ssum

ing

anin

tere

st r

ate

of 8

%, t

he m

onth

ly p

aym

ent f

oran

ave

rage

Sta

ffor

d lo

an b

alan

ce o

f $9

,830

unde

r th

e st

anda

rd 1

0-ye

ar r

epay

men

t pla

nw

ould

be

$119

. The

bor

row

er w

ould

nee

dan

ann

ual i

ncom

e of

$17

,850

to m

eet t

he8%

deb

t-to

-inc

ome

ratio

.

Firs

t Hal

f of

199

8A

vera

ge P

ost-

Scho

ol D

ebt B

urde

n

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

997

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

996

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

995

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

e

All

Und

ergr

adua

te S

tude

nts

Who

Lea

ve S

choo

l Ow

ing:

Und

ergr

adua

teSt

uden

tsE

nter

ing

Les

s$5

,000

$10,

000

$15,

000

$20,

000

$25,

000

Post

-Sec

onda

ryth

anto

toto

toor

Gra

ce P

erio

d$5

,000

$9,9

99$1

4,99

9$1

9,99

9$2

4,99

9M

ore

$ 9,

830

$2,7

13$

6,95

0$1

2,13

0$1

7,26

9$2

2,09

5$3

3,73

3$

119

$50

$84

$14

7$

210

$26

8$

409

$17,

850

$7,5

00$1

2,60

0$2

2,05

0$3

1,50

0$4

0,20

0$6

1,35

0

$ 9,

723

$2,7

52$

6,94

9$1

2,17

5$1

7,27

1$2

2,10

4$3

3,11

4$

118

$50

$84

$14

8$

210

$26

8$

402

$17,

700

$7,5

00$1

2,60

0$2

2,20

0$3

1,50

0$4

0,20

0$6

0,30

0

$ 9,

302

$2,7

33$

6,99

3$1

2,14

3$1

7,18

5$2

2,19

8$3

1,92

1$

113

$50

$85

$14

7$

209

$26

9$

387

$16,

950

$7,5

00$1

2,75

0$2

2,05

0$3

1,35

0$4

0,35

0$5

8,05

0

$ 8,

551

$2,6

58$

7,03

7$1

2,14

6$1

6,88

9$2

2,12

0$3

1,20

3$

104

$50

$85

$14

7$

205

$26

8$

379

$15,

600

$7,5

00$1

2,75

0$2

2,05

0$3

0,75

0$4

0,20

0$5

6,85

0

NO

TE

:St

affo

rd lo

ans

char

ge a

var

iabl

e in

tere

st r

ate

that

is a

djus

ted

annu

ally

, sub

ject

to a

max

Mum

rat

e of

8.2

5%. F

or c

alcu

latio

n pu

rpos

es, t

he in

tere

st r

ate

isas

sum

ed to

hol

d co

nsta

nt a

t 8%

. Sta

ffor

dbo

rrow

ers

are

requ

ired

to m

ake

min

imum

mon

thly

inst

allm

ents

of

$50;

thus

, sm

all-

dolla

r lo

an b

alan

ces

(les

s th

an $

4,20

0) w

ill b

e re

paid

in le

ss th

an 1

0 ye

ars.

Num

bers

are

rou

nded

to w

hole

dol

lars

.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

/USA

Gro

up, I

nc.

5051

Tab

le 1

11.3

: Min

imum

Ann

ual I

ncom

e Le

vels

Nee

ded

to S

uppo

rt In

debt

edne

ss

of T

wo-

Yea

r S

choo

l Stu

dent

s/S

tand

ard

Rep

aym

ent

Len

ders

rec

omm

end

that

stu

dent

loan

paym

ents

sho

uld

not e

xcee

d 8%

of

the

borr

ower

's m

onth

ly in

com

e. A

ssum

ing

anin

tere

st r

ate

of 8

%, t

he m

onth

ly p

aym

ent f

oran

ave

rage

Sta

ffbr

d lo

an b

alan

ce o

f $4

,525

unde

r th

e st

anda

rd 1

0-ye

ar r

epay

men

t pla

nw

ould

be

$55.

The

bor

row

er w

ould

nee

d an

annu

al in

com

e of

$8,

250

to m

eet t

he 8

%de

bt-t

o-in

com

e ra

tio.

All

Tw

o-Y

ear/

Tw

o-Y

ear

Scho

ol S

tude

nts

Who

Lea

ve S

choo

l Ow

ing:

Thr

ee-Y

ear

Stud

ents

Ent

erin

gL

ess

$5,0

00$1

0,00

0$1

5,00

0$2

0,00

0$2

5,00

0Po

st-S

econ

dary

than

toto

toto

orG

race

Per

iod

$5,0

00$9

,999

$14,

999

$19,

999

$24,

999

Mor

e

Firs

t Hal

f of

199

8 I

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

$4,5

25$2

,482

$ 6,

723

$12,

304

$17,

187

$21,

991

$28,

800

Mon

thly

Pay

men

t Am

ount

$55

$50

$82

$14

9$

209

$26

7$

349

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

e$8

,250

$7,5

00$1

2,30

0$2

2,35

0$3

1,35

0$4

0,05

0$5

2,35

0Fi

rst H

alf

of 1

997

7A

vera

ge P

ost-

Scho

ol D

ebt B

urde

n$4

,358

$2,5

00$

6,76

0$1

2,19

9$1

6,79

6$2

1,65

9$2

6,79

1

Mon

thly

Pay

men

t Am

ount

$53

$50

$82

$14

8$

204

$26

3$

325

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

e$7

,950

$7,5

00$1

2,30

0$2

2,20

0$3

0,60

0$3

9,45

0$4

8,75

0Fi

rst H

alf

of 1

996

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

$4,0

04$2

,452

$ 6,

701

$12,

276

$16,

650

$21,

313

Mon

thly

Pay

men

t Am

ount

$50

$50

$81

$14

9$

202

$25

9A

nnua

l Inc

ome

Nee

ded

to M

eet 8

% R

ule

$7,5

00$7

,500

$12,

150

$22,

350

$30,

300

$38,

850

Firs

t Hal

f of

199

5;A

vera

ge P

ost-

Scho

ol D

ebt B

urde

n$3

,565

$2,3

87$

6,58

9$1

1,13

6

Mon

thly

Pay

men

t Am

ount

$50

$50

$80

$13

5

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

e$7

,500

$7,5

00$1

2,00

0$2

0,25

0

NO

TE

:St

affo

rd lo

ans

char

ge a

var

iabl

e in

tere

st r

ate

that

is a

djus

ted

annu

ally

, sub

ject

to a

max

imum

rat

e of

8.2

5%. F

or c

alcu

latio

n pu

rpos

es, t

he in

tere

st r

ate

isas

sum

ed to

hol

d co

nsta

nt a

t 8%

. Sta

ffor

dbo

rrow

ers

are

requ

ired

to m

ake

min

imum

mon

thly

inst

allm

ents

of

$50;

thus

, sm

all-

dolla

r lo

an b

alan

ces

(les

s th

an $

4,20

0) w

ill b

e re

paid

in le

ss th

an 1

0 ye

ars.

Num

bers

are

rou

nded

to w

hole

dol

lars

.

Sour

ce:

USA

Gro

up L

oan

Serv

ices

/USA

Gro

up, I

nc.

5

Tab

le 1

11.4

: Min

imum

Ann

ual I

ncom

e Le

vels

Nee

ded

to S

uppo

rt In

debt

edne

ss

of P

ropr

ieta

ry S

choo

l Stu

dent

s/S

tand

ard

Rep

aym

ent

Len

ders

rec

omm

end

that

stu

dent

loan

paym

ents

sho

uld

not e

xcee

d 8%

of

the

borr

ower

's m

onth

ly in

com

e. A

ssum

ing

anin

tere

st r

ate

of 8

%, t

he m

onth

ly p

aym

ent f

oran

ave

rage

Sta

ffor

d lo

an b

alan

ce o

f $7

,997

unde

r th

e st

anda

rd 1

0-ye

ar r

epay

men

t pla

nw

ould

be

$97.

The

bor

row

er w

ould

nee

d an

annu

al in

com

e of

$14

,550

to m

eet t

he 8

%de

bt-t

o-in

com

e ra

tio.

Firs

t Hal

f of

199

8A

vera

ge P

ost-

Scho

ol D

ebt B

urde

nM

onth

ly P

aym

ent A

mou

ntA

nnua

l Inc

ome

Nee

ded

to M

eet 8

% R

ule

Firs

t Hal

f of

199

7.

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

996

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

eFi

rst H

alf

of 1

995

Ave

rage

Pos

t-Sc

hool

Deb

t Bur

den

Mon

thly

Pay

men

t Am

ount

Ann

ual I

ncom

e N

eede

d to

Mee

t 8%

Rul

e

All

Prop

riet

ary

Prop

riet

ary

Scho

ol S

tude

nts

Who

Lea

ve S

choo

l Ow

ing:

Scho

olSt

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usaGroup Foundation"

Table IV:

Repayment Plan Selection Rates for Stafford& Consolidation Borrowers

The standard level-payment option clearly remains the repayment method of choice for

Stafford borrowers who started making payments on their loans in the 12 months ending

June 30, 1998. However, the percentage of borrowers entering repayment who select

graduated repayment rose nearly 28% during the past year.

Four-fifths of the borrowers who consolidated their loans in the 12 months that ended June30, 1998, selected the level-repayment plan.

Percentage of

Borrowers SelectingOption

GraduatedLevel Repayment Repayment

Income-Sensitive

Repayment

1998 1997 1998 1997 1998 1997

Stafford Borrowers 91.01% 93.07% 8.53% 6.68% 0.45% 0.25%

Consolidation 81.46% 83.39% 18.03% 16.23% 0.51% 0.37%

Source: USA Group Loan Services, Inc.IUSA Group, Inc.

Table V:

Debt-to-Income Ratios/Comparative Analysis 1998 Indebtedness

Depending on individual circumstances, different borrowers will experience monthly payment stress at debt-to-income ratios that are higher or lower than thestandard 8% cited by lenders. In general, modest income borrowers are likely to experience stress at lower debt-to-income ratios, while hIgher-incomeborrowers will be able to tolerate higher debt-burden ratios. Although minimum income requirements decline as the debt-burden ratio rises, borrowersshould realize that they must allocate more of their discretionary income toward student loan payments and will have less money available for other consumerexpenditures, including rent, food, and trans ortation. This table shows the minimum annual income needed to meet each of five debt-to-income ratios,ranging from 5% to 15%, for the rypical Staff brd debt burdens facing borrowers entering repayment in the second half of 1998.

Borrower

Category

Undergraduate Students:

IAverage

Balance

All Borrowers $9,830

Borrowers Who Owe:

Less than $5,000 $2,713

$5,000 to $9,999 $6,950

$10,000 to $14,999 $12,130

$15,000 to $19,999 $17,269

$20,000 to $24,999 $22,095

$25,000 or more $33,733

Graduate Students:


Borrowers Who Owe:

Less than $5,000 $2,854

$5,000 to $9,999 $7,055

$10,000 to $14,999 $12,121

$15,000 to $19,999 $17,589

$20,000 to $24,999 $22,018

$25,000 or more $58,134

Community College Students:


Borrowers Who Owe:

Less than $5,000 $2,482

$5,000 to $9,999 $6,723

$10,000 to $14,999 $12,304

$15,000 to $19,999 $17,187

$20,000 to $24,999 $21,991

$25,000 or more $28,800

Proprietary School Students:


Borrowers Who Owe:

IPcs than $5,000 $2,619

$5,000 to $9,999 $7,267

$10,000 to $14,999 $12,562

$15,000 to $19,999 $17,342

$20,000 to $24,999 $21,645

$25,000 or more $33,016

Monthly

Payment

Annual Income Needed to Support Debt/Income Ratio of:

5% 8% 10% 12% 15%

$119 $28,624 $17,890 $14,312 $11,927 $9,541

$50 $12,000 $7,500 $6,000 $5,000 $4,000

$84 $20,160 $12,600 $10,080 $8,400 $6,720

$147 $35,280 $22,050 $17,640 $14,700 $11,760

$210 $50,400 $31,500 $25,200 $21,000 $16,800

$268 $64,320 $40,200 $32,160 $26,800 $21,440

$409 $98,160 $61,350 $49,080 $40,900 $32,720

$278 $66,720 $41,700 $33,360 $27,800 $22,240

$50 $12,000 $7,500 $6,000 $5,000 $4,000

$86 $20,640 $12,900 $10,320 $8,600 $6,880

$147 $35,280 $22,050 $17,640 $14,700 $11,760

$213 $51,120 $31,950 $25,560 $21,300 $17,040

$267 $64,080 $40,050 $32,040 $26,700 $21,360

$705 $169,200 $105,750 $84,600 $70,500 $56,400

$55 $13,200 $8,250 $6,600 $5,500 $4,400

$50 $12,000 $7,500 $6,000 $5,000 $4,000

$82 $19,680 $12,300 $9,840 $8,200 $6,560

$149 $35,760 $22,350 $17,880 $14,900 $11,920

$209 $50,160 $31,350 $25,080 $20,900 $16,720

$267 $64,080 $40,050 $32,040 $26,700 $21,360

$349 $83,760 $52,350 $41,880 $34,900 $27,920

$97 $23,280 $14,550 $11,640 $9,700 $7,760

$50 $12,000 $7,500 $6,000 $5,000 $4,000

$88 $21,120 $13,200 $10,560 $8,800 $7,040

$152 $36,480 $22,800 $18,240 $15,200 $12,160

$210 $50,400 $31,500 $25,200 $21,000 $16,800

$263 $63,120 $39,450 $31,560 $26,300 $21,040

$401 $96,240 $60,150 $48,120 $40,100 $32,080

Notes: The initial loan amounts include principal and accrued interest. The morithly payment is based on the standard payment plan, which has a maximum payback period of10 years. Stafford loans charge a variable interest rate that is adjusted annually, subject to a maximum rate of 8.25%. For calculation purposes, the interest rate is assumed tohold constant at 8%, and monthly payments are rounded to the nearest whole dollar. Stafford borrowers are required co make minimum monthly paymen ts of$50; thuslow-dollar loan balances (less than $4,200) will be repaid in less than 10 years.

Source: USA Group Loan Services, Inc/USA Group, Inc.

Also Available from the USA Group Foundation

New Agenda Series'

It's All Relative: The Role of Parents in College Financing and Enrollment

by William L. Stringer, Alisa E Cunningham,Colleen T. O'Brien and Jamie Merisotis

This 62-page monograph reveals a shifting landscape of who pays for collegeand how they are paying for it. Parents over the last decade are covering lessof the growing price of their children's college education. While the averageprice of attending a four-year institution has risen by an inflation-adjusted 38percent in the last 10 years, parental support has actually dropped by 8percent in that period. Overall, parents are relying on current incomes more,saving at far lower levels than needed to pay for college, and for those whotake out loans borrowing higher amounts.

October 1998

usAQroup Foundation New Agenda SeriesTh'

he purpose of the USkEroup:Foundation is to carry out the

research and philanthropic.goals'',

of USA Group; Inc:, with'specialtemphasis orrimprovingihigher education:

Specifically, thefOundation supports-,..

original and sponsored:researckantsponsors selectedbducational'activities:Thefbundationalso'supportsbducational,and:civic nonprofit endeavors-primarily1

in thacommunities:wheraUSA-Roup...employees live and work:,

ThaFbundation encourages original

sponsored research; which is typicallycommissioned by the Fbundation to

address critical issues about the-

improvement of highereducation:,

Bblieving thatpublished.researchnarhave the longest-terrrrimpactontighereducation, the Fbundation publishes,and_

disseminatesarticles; research repo=and books. TOpics and approaches to:

subject matter that are-morapracticaltharrtheoretical, and whictremphasizetpragniatic tools.that wilrassist institutionsand'public policy makers, arapreferred.

Additional informationabouttha:-FOundation may be-obtained from:-

Ur: Rbbert C: Dickesom

SbniorVice PresidéntUSA,Gtoup,Fbundationv

ROT Bbx 70393.

Indianapolis; IN4620770391

317/951-6755:

317/951-50631am

[email protected]

The USA Group FoundationNew Agenda Series'

Rbberff DickesonEkecutive Editor

Jean Ef. Rbse,

Managing. Editor

7 Natasha,SWingley, .

' DOsiga&PiodUction

Printed by Design Printing

USA Gioup FOundationEditorial Advisory Board

MarthaDILamkin1, SusanO Cbnner:

Robert P: Murray

Patricia:M: Sbherschel

Sara Murray-Pkimer

The.LISA Gioup Foundation New

AgendaSeries7 is published

periodically bythe USA GroupFOundation-, P.0 BOx 7039, Indianapolis,

. Indiana 4620T-7039.

Copyright CX1998,USA Group, Inc.

Allrightveservad:

Additional informatiOrrahout USA Doupyc

'maybaobtained:by:visiting,thaweli.sita ,

...-at:www:usagroupcomi-

POSTMASTER!' Send all address changes

to.,USXffrouP,Fbundation, P.O. Box 7039,

t Ihdianapolisi.Indiana 46207:7039.

1111:121111111411111*

usAGroup Foundatiorim

.1 BEST COPY AV ABLE

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