Introduction

Over the past 20 years, college tuition has increased considerably, sparking robust national conversations about student indebtedness and spurring a movement to make college tuition-free.¹ But while tuition payments are often an investment in skills and knowledge, tuition is not the only cost putting college out of reach. Students must also pay for non-tuition expenses, including books, supplies, housing, food, and transportation, not to mention added costs like health care, and, for the one in four students with a dependent, child care.

In many cases, these non-tuition expenses eclipse the prices listed for students’ coursework. According to the College Board, in the 2017 school year, the average annual tuition published by community colleges was a modest $3,570, but the average total cost of attendance, which includes tuition along with non-tuition expenses, came to $17,580.² That means tuition constitutes only about 20 percent of the average community college student’s total sticker price, with the remaining 80 percent associated with non-tuition expenses. Non-tuition expenses also exceed the sticker price of tuition for students attending public four-year universities in-state and living on campus.³ Since students in public two- and four-year schools make up three-quarters of all undergraduates, living costs—not tuition bills—are the primary drivers of educational expenses for many students.⁴ Despite this, relatively little is known about how much and how often student debt is driven by non-tuition expenses.

Student loans are available to help with direct costs like tuition and fees and indirect costs like living expenses. Rather than being provided directly to the student, these loan dollars flow through the college in which a student plans to enroll. Upon receiving the loan funds, the college first uses the loan disbursement to cover the tuition and fees the student owes, with any additional dollars borrowed provided in the form of a refund that can be used to cover living expenses or other necessary non-tuition costs. While federal student loans come with annual and aggregate borrowing limits, other types of education loans, such as federal loans to parents or private student loans, are often available to cover the entire cost of attendance, though they are much less commonly used. In practice, these other loans function similarly to federal student loans, in that any amount borrowed in excess of tuition and fees is made available to the student to cover his or her outside expenses.

Our analysis suggests that students are primarily borrowing to cover tuition, supplies, and minimal living expenses.

While the rationale for borrowing to cover tuition has been accepted by many, the use of student borrowing to pay for non-tuition expenses is substantially more controversial.⁵ On the one hand, since many students’ options for covering their non-tuition expenses are limited, they may have no choice but to borrow to pay for non-tuition elements of their education or else forgo certain expenses. However, some college administrators and federal policymakers believe that students are borrowing to live lavishly.⁶ Indeed, the research suggests that most undergraduates must make complicated choices in order to maximize their current and future well-being,⁷ since covering basic needs enables them to perform well in school even if it requires taking on debt. But borrowing increases risks later down the road.

Whether and how much to borrow for non-tuition expenses is not just a problem for students. In addition to existing requirements that penalize colleges when a high percentage of former students default on their loans, colleges may soon face additional scrutiny for other loan repayment outcomes, according to recent statements from Lamar Alexander, Chairman of the Senate Committee on Health Education, Labor & Pensions.⁸ Aid administrators on campus must carefully balance providing students the resources they need to succeed without damaging their own loan repayment metrics.⁹

To better understand the extent to which students are borrowing for non-tuition expenses, this report explores the relationship between the net price of tuition and fees paid by each student to the amount borrowed in federal student loans, loans to parents, and private loans. We use data from the National Postsecondary Aid Study for the 2015–16 school year, a nationally representative survey of undergraduate students.

Our exploration indicates that the majority of undergraduate students are not relying on loans at all. In fact, just 38 percent of undergraduates borrowed for their education in the 2015–16 school year, and fewer than one-third of students borrowed more than they paid in tuition and fees. However, among students who take on debt, borrowing for non-tuition costs is indeed the norm: three of four borrowers took on debt levels that exceeded what they paid in tuition and fees. The ability to borrow above the cost of tuition may lead some stakeholders to question whether students are subsidizing unnecessary expenses with student loans. Instead, our analysis suggests that students are primarily borrowing to cover tuition, supplies, and minimal living expenses. Other key findings include:

• After accounting for inflation, the amount students are borrowing for non-tuition costs has changed very little over the last two decades. Among undergraduate students who borrowed in 1999–2000, the average borrower took on $3,309 more than she paid in tuition and fees. In 2015–16, that number had actually dropped, to $2,558.
• The schools that students attend are correlated with whether they borrow, and whether those loans are applied to non-tuition costs. For example, while only 14 percent of students at public two-year institutions take on any debt, nearly all these who borrow use some portion of their loans for non-tuition expenses. On average, borrowers at public two-year institutions take out nearly $4,000 more than they paid in tuition and fees.
• Since enrollment differs widely between sectors of higher education, the share of students who borrow within each sector does not reflect the number of students who do so. For instance, we estimate that about 4.7 million undergraduates borrow more than they pay in tuition and fees. While a similar share of students at private nonprofit and public four-year institutions borrow for non-tuition expenses, this translates to a little more than a million students at private nonprofit schools and about 2.6 million who attend public four-year institutions. Just over 800,000 community college students and less than 400,000 students at for-profit colleges do the same.
• Students who come from low-income families are more likely to borrow in excess of tuition. While two in five students from the lowest income quintile borrow loans for any reason, one third borrow more than they paid in tuition and fees. In comparison, while a similar share of students from families in the top income quintile borrow, just one in five borrow more than they paid in tuition and fees.
• Within each sector, low-income students tend to borrow more for non-tuition expenses than their higher-income peers. In addition, students within the same income category borrow more often for non-tuition expenses if they attend public or nonprofit institutions. This indicates that both family income level and the type of institution a student attends can impact borrowing decisions, including whether or not a student borrows for non-tuition expenses.

In order to better understand how and why students borrow for non-tuition costs, we begin with a discussion about why debt used to cover these outside expenses plays a pivotal role in many students’ academic lives, including how the impetus for borrowing might differ based on a student’s socioeconomic background, and the tradeoffs that borrowing for living expenses poses for not only students but also institutions and taxpayers. We devote the remainder of our analysis to understanding student borrowing over time, as well as how students’ income and institutional sector relate to whether or not they borrow for non-tuition expenses. We then explore the extent to which other factors—including race, degree type, whether students enroll full- or part-time, and where students live—are correlated with borrowing decisions. Finally, armed with a more accurate depiction of the amount and likelihood that different students borrow above tuition, we discuss the policy implications of financing non-tuition expenses with debt.