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How Not Taking Out Student Loans Can Derail Your College Education

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With the cost of tuition rising and the economy seizing up, it would seem that most students are going to need some form of student loan to pay for college. But according to a Monday report released by the Institute for Higher Education Policy, there are a growing number of students who forgo borrowing — despite needing it and being qualified for aid.

According to the report, there are three reasons students may chose not to borrow money, despite need and being qualified:

1) They attend less expensive schools and/or attend very part-time. In 2003-2004, part-time community college students were the least likely to take out student loans.

2) They are older, employed and delay college until they can finance it with their current income or other saved resources.

3) They are a member of an immigrant or ethnic group, whose cultural values dissuade them from borrowing money from school.  In 2003-2004, the report found that Latino and Asian students were less likely to take out student loans than White or Black students. Immigrants are also significantly less likely than non-immigrants to borrow for school.  These figures are irrespective of the degree of students’ need.

The report also found that rates of borrowing have increased significantly since the early 1990s.  In 1992, less than 15% of students took out student loans.  In 2003-2004, over 35% of students did.  The number jumps significantly for grad students — nearly 87% of law students take out loans.

Finally, the report also says that there are some potential negative consequences for those who don’t take out loans.  By not borrowing money for school, students may be hurting the chances of finishing school. According to Institute for Higher Education President Michelle Asha Cooper:

An aversion to borrowing could be limiting college enrollment choices for some students, which is a possible indication of a larger problem that is related to student decision making. It is important to identify if there are certain patterns and behaviors of students who do not want to borrow in an effort to help financial aid administrators, high school counselors, and others target students who may need additional help in deciding how to finance their college career.

Are you averse to taking out student loans?  If you don’t have enough to pay for college, what is holding you back from a subsidized federal student loan?

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