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Abstract

Popular opinion holds that education debt significantly affects borrower decisions. The assumption is that indebtedness may cause borrowers to drop out of college, cancel plans for graduate school, or change career plans. Former students might delay the purchase of a home or car, postpone plans for marriage or a family, or live with parents after graduating because of their repayment options. To test this hypothesis, Nellie Mae, a student loan originator and secondary market for federal and private education loans, conducted the National Student Loan Survey (NASLS). The objective of the NASLS was to determine both indebtedness levels for all education loans (federal and private) and the effect that debt has on decision making, lifestyles and consumer behavior. Because Nellie Mae also conducted similar surveys in 1987 and 1991, there are comparative data that track changes in both borrower attitudes and behavior. While the 1997 study shows significant increases in borrowers reporting that they delayed decisions and activities, the evidence does not support the idea that debt levels affect major life decisions. Rather, these decisions are determined by age, income, marital status, or possibly factors not gathered through this type of survey. Nonetheless, average student debt levels have risen dramatically, and some students are using greater proportions of their incomes for the monthly student loan payment than is considered reasonable by most financial standards. A majority of borrowers report that student loans provided critical access to higher education. For the most part, borrowers are satisfied with the education they received and feel that their investment, through loans, was worth it both for personal growth and for career preparation.

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