Three Ways to Limit Overborrowing for Higher Education


Students and families borrow nearly $100 billion from the federal government annually

Each year, students and families borrow nearly $100 billion from the federal government for higher education. Many times, they’re borrowing more than they need to, and often more than they are able to repay.

In the 2021-22 academic year, 49% of bachelor’s degree recipients from public four-year institutions graduated with an average federal debt level of $20,700 per borrower, found College Board’s 2023 Trends in College Pricing and Student Aid.  According to Sallie Mae’s How America Pays for College report, students during the 2022-2023 academic year borrowed an average of $11,337 and parents $13,507 to pay for higher education, an increase of 21% and 25%, respectively, over the previous year.

Programs that allow unlimited loan amounts, complex applications for financial aid, and confusion over eligibility for grants and scholarships all contribute to overborrowing.

Here are three ways to help address overborrowing:

Encourage Students to Start with Grants and Scholarships

Each year, the Free Application for Federal Student Aid (FAFSA®)* opens the door to more than $100 billion in grants, scholarships, state-based aid, federal student loans and work-study programs. Still, 30% of families didn’t apply last academic year, including those from low-income families who would be most eligible for free money like scholarships and grants. Many aren’t applying because the form is too complex, they believe their family’s income is too high or they simply lack awareness about the FAFSA. 

Adding to the complications this year are significant glitches and delays resulting from the rollout of a new, streamlined FAFSA. While the intent was to simplify the process and expand eligibility for need-based aid, persistent implementation issues have left students and families frustrated. Still, it’s critical we continue to educate students and families about the importance of completing the FAFSA so they can access free money for college.

Similarly, more than $100 million in scholarships goes unclaimed each year. Too many students and families don’t apply for scholarships thinking they are reserved for top students or athletes, but there are scholarships available for a wide variety of skills and interests. Free resources like Scholarship Search by Sallie simplifies the process, connecting students and families to scholarships.

Standardize Financial Aid Offers

Financial aid offers too often leave families confused about the true cost of higher education, according to a study by the federal Government Accountability Office (GAO). It found 91% of colleges and universities did not clearly state the net price of college — the amount a student owes after scholarships and grants — in their financial aid offers.  

A standardized, transparent offer that clearly itemizes direct costs and fees would help students and families make informed decisions about which school to attend and how much they’re expecting to pay—ultimately helping to avoid overborrowing.

Consider Reasonable Limits for Federal Loan Amounts

Some federal lending programs allow students and families to borrow unlimited amounts to pay for higher education, a policy that has resulted in higher student and parent debt and contributed to the rising cost of tuition.

In fact, unlimited federal government loans have contributed to federal graduate student debt reaching its highest amount ever. According to a recent report by the U.S. Department of Education, the share of students who borrowed more than $80,000 to cover graduate costs increased from 1.4% in 2000 to 11% in 2016.

New America Foundation and the Urban Institute have recommended putting reasonable limits on these federal loans to prevent students and families from borrowing more than they can afford to repay. This type of reform could also slow the exponential growth of college tuition.

These three reforms are important steps toward helping students and families borrow responsibly, while ensuring access to higher education.

FAFSA is a registered service mark of U.S. Department of Education, Federal Student Aid