New Directions in Student Loans:
Intergenerational Equity

A Commissioned Paper

Sandy Baum 1994

The Ford Federal Direct Lending Program was designed to streamline the student loan process and reduce government costs by eliminating the subsidies now received by banks and guarantee agencies involved in the existing Federal Family Education Loan Program. The accompanying expansion of repayment options for students is intended to ease the burden of repayment and reduce the default problem. These changes, along with the recent increase in the ceiling on borrowing permitted under both the Stafford and PLUS loan programs and the introduction of unsubsidized Stafford loans may, however, have some unintended consequences. One area of concern which has received inadequate attention is how the loan program modifications will affect the shares of the burden of financing higher education borne by parents and by students.

This paper examines the inter-generational implications of recent changes in college loan programs. First, however, it provides background on the question of who should pay for college. Are there strong arguments for publicly enforced transfers from one generation to the next? Would a system of individual responsibility for financing higher education be optimal? Are there convincing economic arguments for significant parental participation in paying for college? The basic premise is that it is not possible to evaluate inter-generational effects of specific programs without an understanding of the philosophical, social and economic arguments for any particular division of the burden.

Macroeconomic Inter-Generational Transfers

The public share of college costs involves a macroeconomic inter-generational component. The generation which is now in the labor force makes a forced transfer to the younger generation. Government-imposed inter-generational transfers may be necessary in an economic system based on individual self-interest and voluntary transfers, since there is inadequate incentive for younger generations to support their elders, who no longer have anything to offer them. (See Samuelson, 1958.)

Government-enforced inter-generational transfers will not have a significant macroeconomic impact if they are substitutes for voluntary transfers (Barro, 1974). Social Security transfers, for example, might be balanced by increased bequests to the younger generation. Similarly, public support of education could be offset by decreases in parental bequests to children. From a macroeconomic perspective, with one generation following the next, the timing of the transfer is irrelevant.

There are, nonetheless, important distinctions between voluntary and forced transfers. If parental transfers to children are tied to the consumption of a particular good such as education, then the next generation may end up consuming more education than they would in the absence of the public subsidy. Government education programs will also have real effects if they are on such a large scale that they cannot be cancelled out by declines in voluntary transfers. In addition, there are significant distributional differences between public and private transfers. Even if aggregate voluntary transfers are reduced in the face of public subsidies, the many members of the younger generation whose parents would not be able to make discretionary transfers to them will be able to consume more education.

The self-interest premise, or what Samuelson (1958) describes as the expectation of a "quid pro quo" for all transfers, is an issue for educational policy because of the required timing of the transfers. At the time people are contributing to Social Security, their potential benefits are in the future. The order is reversed in the financing of education. We are asking one generation to pay after they have already received their own education, so failure to pay does not carry the risk of benefit loss for them. This makes the inter-generational transfer harder to enforce and less politically popular. It means we relying less on the idea of individual self-interest and more on the notion of responsibility. It may help to explain why there is more public sympathy for moving toward an individual financing model for higher education than there is for diminishing inter-generational transfers under the Social Security system.

As the cost of postsecondary education has spiraled, the magnitude of private, microeconomic inter-generational transfers has also become an important issue. Not only must we be concerned with the optimal size of public subsidies to postsecondary students, we must also focus on how the private component of the expenditures is divided between generations.

Parents and Students

The federal share of higher education financing fell from 16% in 1960 to 11% in 1990. Increases in state and local government shares from 19% to 23% compensated, allowing the total government share to remain relatively stable. Contributions from parents, however, fell from 43% of total costs in 1960 to 31% in 1990. Over the same time period, the portion of the burden borne by students rose from 10% to 18%. (Philanthropic and other sources cover the remaining portion of costs.) (National Commission, p.23).

A sizeable portion of the increased burden on students is a result of demographic changes in the student body. The proportion of postsecondary students who are either too old to be financially dependent on their parents or whose parents are not financially secure enough to subsidize them has risen dramatically. In order to provide access to these new groups of students, both grant and loan programs have expanded. For independent students and those whose parents are indigent, the only choice is between public subsidy and student borrowing, not between parental support and student borrowing. Accordingly, the following discussion of the generational division of the burden applies only to the segment of college students whose parents do have the financial capacity to contribute.

The Student-Based Model

It is not difficult to argue on economic efficiency grounds that students should bear the lion's share of the costs of higher education. Education is an investment in human capital which is expected to increase future earnings. If the rate of return to the investment is inadequate to pay off loans incurred, the investment is not efficient. A system which forces students to borrow the entire cost of their education, while assuring access to liquidity, is sometimes proposed on these grounds.

Modifications to this approach can be made to account for positive externalities. Society should subsidize students who will not reap the full social benefits of their educations. Most discussions of the externalities of higher education focus on the significant economic return to individuals and conclude that externalities account for only a small fraction of the benefits. But it is surely true that the social benefits differ for different groups of students. The social benefit of encouraging young people at high risk of unemployment or permanent exclusion from the primary labor market to attend college is greater than the social benefit of an expensive education for those who are already well-positioned to be productive citizens. The high average private return to higher education may mask significant social returns for certain subgroups.

Some additional amount of subsidy to students might also be required to prevent under-investment, since eighteen year old high school graduates are not perfectly informed, rational decision-makers. Their desire for immediate gratification and undervaluing of future benefits may cause young people to choose the job market (or a life of leisure) over human capital investment, despite the long-run inefficiency of this choice.

This student-based financing model is consistent with a life-cycle model of savings and consumption. Each generation would borrow to finance its own education and save in advance for its own retirement. The younger generation might borrow the funds being saved by the middle-aged generation. The repayment of educational debt would provide the retirement income of the older generation.

Even if it were an efficient model, there would be serious equity implications to the student-based model. Debt burdens will be distributed according to parental circumstances. Unless all parents, regardless of their financial means, stop subsidizing their children's educations, it is those students whose parents can't pay and those whose parents either don't value higher education or don't feel responsible for their children who will face high debt burdens. Although existing debt levels do not appear to seriously affect lifestyle choices, the debt levels accompanying a major shift in responsibility to the student generation could have major repercussions on both standard of living and life choices. Some of these distributional inequities might be ameliorated by the income-contingent repayment system, which will allow subsidy levels to be determined by lifetime income, rather than just by parental income. This issue is discussed in greater depth below.

The efficiency/rate-of-return framework for analyzing the generational division of the burden of paying for college ignores another vital issue, that of social responsibility. The idea that each individual is responsible for his or her own welfare is consistent with economic theory based on the concept of rational economic agents focusing on their own self-interest. But it is not consistent with broader social norms.

A social norm in our society prescribes parental responsibility for the welfare of children. The fundamental issue at hand is whether that responsibility extends to the provision of higher education, if financially feasible. A financing system which puts students first in line to pay is an explicit rejection of this norm, which has persisted in this country for generations. Perhaps the shift can be defended, but it should not be made lightly.

Can Economic Theory Explain Why Parents Do Pay and Should Pay?

Several theoretical approaches in the economics literature may apply to the question of the motivation of parents in paying for college. Here again, the potential conflict between a strict efficiency-based utility-maximizing framework and the sense of personal or social responsibility arises. Perhaps only an economist would feel compelled even to raise the question of why parents sacrifice their own consumption to finance their children's educations. Parents love their children and are interested in their well-being; they feel a responsibility to support their children until they are able to support themselves; they are part of a family which is more than the sum of the individuals who happen to share a residence. From this perspective, it would be reasonable to assume that education is just one of the many items purchased (or investments made) by the family for the benefit of all or some of its members. Parents, in general, do as much as they can to provide for their children. In the terms discussed above, there is a social norm which generates this sense of responsibility.

One approach, which might be consistent with a focus on social norms, is to view parents as being parties to a contract with their children. Making the sacrifices required to provide for them is simply one aspect of carrying out the terms of the contract. But a problem exists in the reality that providing higher education is not an obligation under the contract as perceived by many parents. One of the basic policy issues may be how to modify the social contract to encourage parents to take more responsibility for financing college. The issue may not be why parents fulfill their contracts to their children, so much as how we can justify and implement changes in those contracts.

It seems reasonable to investigate what economic theory can contribute to an understanding of parental contributions. How can a theory based on self-interest explain parental transfers to children, and particularly those like paying for college, which cannot be construed as mandatory? Several possible approaches to the who-should-pay dilemma which emerge from the economics literature are discussed below. These include altruism, economic analysis of the family, grants versus exchanges.

The economic model of altruism essentially explains generosity as selfishness, simply one of many possible preferences. An altruistic person is one who is happier if another person's well-being increases. A more limited form of altruism exists when someone feels better if another individual's consumption of a particular good increases. This idea is more useful for analyzing college payment. If children choose not to go to college, parents do not usually provide a similar amount of money for them to spend as they please. Parents may believe that they are better able to determine what will make the children better off in the long-run than are the children themselves.

But only in economic models is altruism a "taste" like the taste for coffee. In reality, it is a basic human quality which is not satisfactorily incorporated into neo-classical economic analysis. People don't "decide" how much to support their children as part of a utility-maximizing calculus. Our society relies on the idea that parents care for their children in a way that is similar to the way they care for themselves; they don't separate their children's well-being from their own in the manner required for the standard economic analysis of altruism.

While the economic approach to altruism is not very useful in determining the socially desirable division of the burden, perhaps it can provide some insight into why parents appear to be increasingly reluctant to subsidize their children's educations. Affluent divorced parents who go to court arguing that they are not responsible for paying for college certainly seem to be acting out of pure economic self-interest. If we see large numbers of financially secure parents pushing their children into unsubsidized Stafford loans instead of taking PLUS loans for which the children are not responsible, this will be a further indication that parents see their interests as separate from those of their children and that the concept of parental responsibility for providing educational opportunities is not a generally accepted part of the social contract.

Still, it seems inappropriate to give up on the idea of the nuclear family as an economic unit. The literature on the economics of the family, which treats the family as a group of individual utility-maximizers (Becker, 1981), maintains the core of individual self-interest, but recognizes the particular inter-dependencies of family members. The fact that the parents may be the decision-makers and financiers, while the children are the recipients of the education, makes this approach relevant.

If parents view their children as separate consumers from themselves and do not expect any direct financial benefit from their children's increased earning power, they may be more interested in the decision whether or not to deprive themselves to provide for their children than on the distinction between consumption expenditures and investment expenditures. On the other hand, paying for education may be an alternative to a bequest, since parents may choose to spend the money on education now, or to save it and increase the size of their bequest. It is also analogous to a bequest in that, unlike money spent on-clothing or entertainment, it constitutes the passing on of a form of capital, increasing the potential income of the recipients.

Much of the economic work on bequests is methodologically similar to that on altruism. A common conclusion is that both bequests and transfers during the lifetime of the donors are more consistent with exchange-related motives than with altruistic motives. (See Bernheim et al, 1985 and Cox, 1987.) This strategic bequest view would suggest that we might approach the college payment question by asking how parents will be rewarded for their sacrifices. But this perspective moves us even farther away from the social responsibility model and points directly toward the student responsibility model.

The alternative of looking at parental financing of college from the perspective of the family as a unit has the disadvantage of obscuring the distinction between the people making the decisions and those getting the direct benefits. It also increases the difficulty of dealing with the changing composition of nuclear families, which include different individuals over time. But it has the advantage of not exaggerating the individualistic nature of intra-family decisions, a shortcoming of the standard economic approach.

The most reasonable assumption may be that parents view the family as a permanent social and emotional unit, despite the fact that it is a temporary economic unit. This assumption is not universally valid, but the deviations from this standard are concentrated outside of the families most relevant for this analysis. Encouraging parents to save and borrow for college is an irrelevant concept for the segments of society characterized by either very low incomes or by weak family connections. Viewing the family as a unit may then be particularly appropriate in the context of this policy issue.

If parents are looking for the best way to invest their funds in order to maximize the long-run economic well-being of the family as a unit, investment in college education for the young may be the rational choice. If the money is spent on consumption for either the parents or the children, there will be no increase in the future consumption possibilities of the family. The parents might choose to make financial investments instead of investing in human capital, or they might choose to increase their own human capital. The longer expected earnings life of the children makes the latter unlikely to be the optimal choice. The issue then becomes one of investing in their children's education or buying stocks and bonds.

If the family is viewed as a long-term unit, the parents making the decision about the allocation of family resources are not attempting to distinguish the benefits accruing to themselves as individuals from those which may accrue to their children after they are no longer living in the same household. Paying for education can be a rational decision, regardless of post-college financial arrangements. While the outcome may be similar to that resulting from an altruism model, the decision-making process is very different.

An interesting but disturbing outgrowth of this line of reasoning is that the distinction between student borrowing and parental borrowing is blurred. Carried to its extreme, it leads to the conclusion that the generational division of the burden within the family is irrelevant. Since treating the family as a unit solves basic problems inherent in the more individualistic approach, but raises new inconsistencies of its own, new perspectives are needed.

In stark contrast to the literature on strategic bequests, Boulding (1981) argues that exchange is only one of a set of social organizers. He defines grants as one-way transfers based on either positive or negative emotions. The "love" part of Boulding's Economy of Love and Fear refers to "integrative relationships" based on status, identity, community, legitimacy, loyalty, love and trust. Another form of grant results from threats, which are rooted in fear. Boulding argues that the psychological returns from personal relationships and the satisfaction donors receive from making grants are qualitatively different from the benefits individuals receive from exchange.

Boulding proposes viewing the family as analogous to a large organization with separate departments. The higher members of the hierarchy are the parents, who are responsible for budget decisions and make grants to the various departments--or children. The allocation of resources is made with the best interests of the entire organization in mind, and the interests of the individual departments can never be completely independent. Like the administrator, the parents view the assets of the grant recipient as a part of their own asset structure. Grants become a reallocation of resources within the organization of the family, rather than real transfers.

Some grants may have the intention of altering behavior. Parental grants to children, particularly college financing, certainly have this characteristic. But they can still be viewed as one-way transfers, rather than searching for the return which the parents expect to receive.

The framework can be extended to allow serial reciprocity--A's grant to B instills a sense of obligation in B, who later makes a grant to C. This model can describe each generation paying for the education of the next generation. It retains the substance of the theory, which posits that complex integrative relationships, such as those between parents and children, result in economic behaviors not adequately described by the notion of exchange. It opens the door to an analysis which puts the self-interested behavior inherent in the student-based financing model, rather than the sense of responsibility at the root of parental financing, on the defensive.

The idea that pure self-interest explains only a subset of human behavior and that people have other psychological and physiological motivations need not diminish the value of traditional economic theory. This dichotomy has lurked in the background of economic theory since Adam Smith wrote both The Theory of Moral Sentiments and The Wealth of Nations. Smith was keenly aware of the "fellow-feeling" central to the successful functioning of society. Unfortunately, the dynamics underlying the Moral Sentiments have been largely neglected by the profession Smith fathered, while the invisible hand has not only prevailed, but perhaps over-reached its bounds. Analysis of the equity and efficiency of economic behaviors which transcend the narrow bounds of the market must rest on a broader base.

The argument is not that standard economic analysis of behavior is invalid, but that it is limited in scope and cannot fully explain forms of human behavior, such as inter-generational transfers, which are rooted in non-market relationships.

It is important that we keep the idea of "integrative relationships" and the humanistic aspect of economic behavior in the forefront while taking advantage of analytical economics. The combination of the two approaches can help us understand why. despite the importance of interest rates, small increases in the rate of return on savings are not the critical factor in encouraging saving for college. It can also make it clear why simple economic efficiency arguments in support of student financing to generate optimal levels of investment in human capital are inadequate. In the end, we may simply have to reach a social consensus on the value of parental support and responsibility for children's educations and on the value of education, not just in terms of increasing future incomes, but in terms of broadening life opportunities in general.

New Directions in Student Loans

In 1993-94, the Federal Family Education Loans Program provided $21 billion, or 51% of all available aid to students (College Board, 1994). The startling 42% increase in borrowing under these programs, from $15 billion a year earlier, was largely the result of increased maximum loan limits and the introduction of unsubsidized Stafford Loans.

While the number of students using Stafford Loans increased by 26%, to 5.3 million between 1992-93 and 1993-94, the number of parents of dependent students borrowing PLUS loans decreased slightly, to 342,000. Although recent modifications in the PLUS program include the introduction of credit worthiness as a requirement, PLUS loans can now be borrowed up to the cost of education minus other aid received, with no specific dollar limit. This increase in available funds can be expected to increase participation in the longer run. It is noteworthy that the average loan size rose significantly and was about 50% larger than the average Stafford loan (College Board, 1994).

The increased availability of loans for both students and parents represents progress. Generous parent loan programs are a pre-requisite for strengthening the parental role in college financing. Regardless of the strength of this priority, reasonable and accessible loans for students are also vital. Subsidized loan programs have dramatically increased educational access and choice. Despite the constant chorus of voices warning against overburdening young people with debt, there is, to date, no evidence of serious problems in this respect.

Unsubsidized loans are important for the provision of liquidity to young people who are unlikely to be in need of public subsidies once they complete their educations. Nonetheless, the introduction of the unsubsidized Stafford loan program, under which students can borrow funds to cover all of their college costs, regardless of the financial circumstances of their families, may have some undesirable side-effects. Because they are not need-based, these loans will be used primarily to meet expected family contributions. Students could choose to borrow instead of taking the highest paid summer job they can find or instead of working during the academic year. But the use of these loans to substitute for the parental contribution is likely to be much greater.

The parental contributions calculated by the need analysis system are too high for most middle-income families to pay comfortably out of their annual incomes. With the exception of the few families who have saved considerable amounts in advance and those who have resources not visible to the need analysis system, borrowing is a necessity. Home equity loans have been the most important single source of this borrowing. Perhaps the expanded PLUS loan program will be an important new source of parental borrowing. Still, unsubsidized student loans are almost certain to take the pressure off parents.

This is not entirely a bad thing. There is a limit to the amount of debt parents can responsibly take on, and that limit is easily surpassed in financing high-cost college educations. Nonetheless, to those who believe in the social importance of increasing parental responsibility, the possibilities presented may be frightening. Parents can now shift large amounts of the calculated parental contribution onto their children in the form of non-need based loans. Families who accept the premises of the student-based payment model will surely make this choice. If this perspective is widespread, or if the models of altruism and bequests based on individual self-interest actually provide reliable descriptions of family behavior, the parental role in financing college is likely to continue its downward trend. Convincing parents that they do have responsibilities and options for financing higher education will become increasingly vital, as well as an increasingly challenging task.

Because of the timing of the innovations, it will be difficult to separate the effects of the unsubsidized Stafford program from those of Direct Lending, with its menu of repayment options. While the source of capital has no particular significance in terms of how families divide the burden of paying for college, new repayment options, and income-contingent repayment in particular, may have some unintended effects.

The income-contingent (ICL) repayment option has been promoted as making student loans manageable for all borrowers. The idea is that students don't have to worry so much about accumulating heavy debt burdens, since their repayment obligations will never be out of proportion to their incomes. It is reasonable to believe that the existence of this program will increase both the willingness of students to borrow and the willingness of parents to pass the burden on.

In fact, however, repayment will be burdensome for many borrowers under the ICL plan. Some students are likely to borrow excessively, believing their repayment obligations will be limited. As Martin Kramer (1994) argues, this will be particularly true if college costs continue their upward spiral and the average pay-off to postsecondary education remains high. Students may be surprised to see the relatively high percentages of income required in repayment which correspond to high debt principal levels. Also, the extended repayment period will seriously erode the possibility of borrowers saving for their children's education. Parents will still be paying for their own educations when their children are ready for college, perpetuating the shift of the burden.

Parents do not enjoy the menu of repayment options, both because extended repayment periods are not reasonable for parents and because of the different earnings curves they face. They will see that they have to repay their entire loans, regardless of their circumstances and are likely to encourage more student borrowing than they otherwise would.

Economists commonly point out that this type of program carries the problem of adverse selection. If participation in the ICL program is optional, those people who choose it are likely to be those who are pessimistic about their future earnings. Students from low-income families are those most likely to expect to have low earnings and, therefore, to be attracted to the ICL option. To the extent that students from middle- and upper-income families expect their incomes to be reasonably high after they complete their educations, they will be more likely to choose traditional repayment options and the existence of the ICL program will be less likely to cause their parents to push the debt burden onto them.

The design of the program, whereby the government, rather than high-income borrowers, will subsidize those who don't earn enough to fully repay their loans, diminishes the adverse selection problem, but makes the program more appealing to those with high earnings expectations--the group for whom the inter-generational shift is an important policy issue.

A precise analysis of the long-run cost (or benefit) to students of the ICL program is difficult. Current estimates from the Department of Education suggest that the average net present value of the repayment stream under the ICL program will be approximately the same as that under the standard repayment plan (Goldenberg and Larin, 1994). This conclusion is, however, dependent on the use of a discount rate (6.68%) which is only slightly lower than the interest rate on the loans (6.93%).

Even with this calculation, the differential impact on groups of borrowers is startling. Low income, high debt borrowers would pay 5% less under the ICL program, because their payments would be significantly lower than under a traditional repayment plan and many would not end up paying back their entire debt over the 25 year period. Medium and high income borrowers with low debts, on the other hand, would find the net present value of their repayment 17-18% higher under the ICL program than under a traditional repayment plan. For them, the small margin between the discount rate and the interest rate makes the extended repayment period costly. If these are students from comfortable families whose parents encourage them to borrow because of the ICL option, the cost to them could be quite high.

The income-contingent repayment plan essentially makes repayment a tax on earnings. Those who do not reap an adequate rate of return are not forced to repay. This provision, designed to increase equity and prevent debt levels from becoming unmanageable, partially corrects a shortcoming of the current system, which bases subsidy levels entirely on pre-college financial circumstances rather than on life-time income. The current system is disproportionately hard on those who come from families who do not qualify for subsidies, but end up with low earnings. It is overly generous to those who receive subsidies based on parental income, but enjoy high earnings after college. The combination of non-need-based unsubsidized loans and income-contingent repayment has the opposite effect, providing generously for those whose families are comfortable but who have low incomes after college. It is not, however, severe for any group, except to the extent that the extended repayment periods increase the total costs of the loans.

Despite its strengths, the ICL program has a potentially negative effect in terms of efficiency, since there is no penalty for students who choose to invest in human capital with a low rate of return. Society bears the entire risk. There will surely be cases where high levels of social benefits are associated with low earnings and incomplete repayment--a few more doctors may devote their lives to serving the poor. But there are likely to be many more cases of investment in education which has little pay-off to anyone. Society will also bear the cost of any consumption component to education (education for its own sake), not correlated with higher market earnings.

Concern for the equitable expenditure of public funds is another reason to approach the ICL program with caution. A positive side-effect of the ICL program should be diminished default costs and less negative reaction to those remaining. Public opposition to subsidizing those whose incomes over their lifetimes are too low to support their educational debt burdens should be less than the current opposition to default subsidies. While students from financially comfortable families who take out unsubsidized loans to finance expensive educations, choose the ICL option, and then follow career paths which are not lucrative are unlikely to account for a major portion of the cost of the program, a few cases could easily cause some bad publicity. The realities of unstable marital patterns, the complexities of how earned and unearned income will be treated in the program, and the allowable debt levels make this possibility a realistic one.

The ICL program is far from perfect. The optimal loan program would make subsidies contingent on overall financial circumstances and would not discourage parental contributions. But if they are well-managed, the new loans programs should provide useful options for many students without causing undue inefficiencies and inequities.

Conclusion and Recommendations for Action

Recent developments in student aid, including the introduction of unsubsidized student loans and of a variety of repayment options, are likely to exacerbate the trend toward student financing of higher education. While an argument can be made on efficiency grounds for this pattern of financing, parental responsibility for higher education should not be allowed to deteriorate further without a deliberate and informed social decision.

Standard economic theory provides some understanding of the motives for parental investment in their children, but its individualistic focus prevents it from painting a realistic and complete picture. Other approaches, which allow for family relationships not centered on exchange, make important contributions and allow for a model of higher education finance which values mutual responsibility and parental involvement as aspects of basic norms which strengthen the social fabric.

The Department should carefully monitor who chooses the ICL repayment to minimize its effect in shifting the burden of paying for college from parents to students. If large numbers of students from families with considerable levels of economic resources are involved, it will become clear that greater effort is required to reinforce the sense of parental responsibility.

One aspect of this monitoring will involve comparing the repayment options chosen by those in the subsidized and unsubsidized loan programs. For those receiving subsidized loans because of documented need, ICL may or may not be the best option. But the concern that students are increasing their borrowing because of the ICL option is more pertinent for the unsubsidized borrowers. The ICL provisions are likely to be modified over time as experience highlights shortcomings. In order to minimize the extent to which non-needy families take advantage of the program, two provisions must be maintained:(1) Repayment should be based on household income, not individual income; and (2) both earned and unearned income should be included in the base.

Perhaps the most critical action for the Department is to provide extensive information to borrowers on the implications of the various repayment options. An understanding of the aggregate cost to the individual of extending the repayment period is a vital element in discouraging excessive borrowing under the program, either through parental transfer of the burden to their children or through efforts to take undue advantage of public subsidies.

References

For more information please write the Planning and Evaluation Service, Office of the Under Secretary, U.S. Department of Education, 400 Maryland Avenue, S.W., Room 3127, Washington, DC 20202-8240.

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