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November 24, 2014

Student loan borrowing slows, as net price of many colleges declines

While headlines have been filled with subjects about the rising cost of college education, the financial challenges of students are becoming less severe, a handful of reports stated recently.

Many market observers have focused on the average published prices charged by academic institutions, which can provide an incomplete picture, as these figures leave out student aid, according to The New York Times.

Public-school tuition hikes slow
Between 2001 and 2003, tuition at four-year state colleges rose 100 percent, the media outlet reported. However, College Board figures reveal that in the last two years, academic institutions' published prices rose only 1 percent when adjusted for inflation, as these organizations gave in to substantial pressure to keep expenses under control.

Weighing financial aid
When financial aid is considered, expenses for higher education look completely different.

A separate College Board report showed that during the 2013-2014 academic year, average four-year colleges' net prices - how much students pay after receiving grants from schools and the government - declined. Between 2010-2011 and 2013-2013, the total debt students took out dropped 13 percent, the report indicated. Borrowing per student also moved lower, decreasing 9 percent during the three-year period.

Student loan debt's growth seemingly frozen
The average net prices at private, non-profit colleges have remained largely unchanged for 12 years, according to The New York Times. Alternatively, net prices at community colleges have declined in the last several years. In addition, two new studies from both the College Board and non-profit organization the Institute for College Access and Success revealed that the fraction of students taking out loans to finance their college education, as well as the amount they borrowed, have reached a peak of sorts, according to the news source.

Sixty-nine percent of participants in an ICAS survey reported having debt, compared to the prior year's fraction of 68 percent. Alternatively, the College Board's research revealed 60 percent of respondents had student loan debt, and carried an average balance of $27,300, The New York Times reported. When conducted one year before, the organization's survey found that the same fraction of participants had loans, and slightly less debt. These figures exclude students who drop out of their degree programs, and for-profit colleges often do not contribute data.

These developments could impact student loan portfolios, and financial institutions that are thinking about purchasing these holdings to bolster their income might consider speaking with Garnet Capital Advisors. An experienced loan sale advisory firm, Garnet has successfully completed numerous student loan portfolio sales.