Why do student loans matter? The following facts illustrate the importance of federal student loans in making postsecondary education possible.

1. Students face a financial aid award gap because financial aid awards today do not fully cover demonstrated student financial need. In fact, according to the National Association of Student Financial Aid Administrators, average student financial aid awards cover only 72% of the average demonstrated financial need of undergraduate students.

2. Grant aid does not offset as much of education costs today as it did previously. In 1986, the average Pell Grant covered 98% of average tuition. By 1999, the same Pell Grants covered only 57% of average tuition.

3. Students need loans to pay for higher education more than ever before. In 1980, grants made up 55% of financial aid and loans made up only 41% of financial aid. By 2000, these numbers were reversed with grants providing only 41% of financial aid and loans providing 58% of financial aid.

4. To close the financial aid award gap, many students are working more hours during the academic year than ever before. 74% of students work during the academic year. Of students who work, nearly half (46%) work 25 or more hours per week.

5. Students have more credit cards than ever before. 54% of freshman have credit cards - more than twice the number who have student loans. By sophomore year, 92% of students have credit cards. By graduation, higher interest credit card debt makes up 16% of an average student's total indebtedness.

6. A federal student loan is an affordable way for students and families to close the gap between available resources and the cost of education. Given the rise in the cost of education, the reduced purchasing power of Pell Grants, and the shift from grants to loans, many students and families have turned to student loans to pay for postsecondary education. If they cannot borrow money through the federal student loan program, they may borrow it from other sources. Compared to home equity loans, personal loans, and credit cards, student loans are the cheapest way to borrow for postsecondary education.

7. Student loans are more affordable than ever. According to the U.S. Department of Education, in 1987, an undergraduate student who graduated with $8,000 in student loan debt and an interest rate of 9 percent could expect to pay about $4,200 in interest costs. Today, if an undergraduate student graduates with $18,000 in student loan debt, thanks to lower interest rates and tax deductibility of student loan interest, the student still pays only $4,200 in interest.

8. Students who take out student loans are more likely to graduate than are those students who do not. According to the American Council on Education, 50% of students who took out student loans in their freshman year were still enrolled in a four-year institution after three years, while only 32% of students without student loans were still enrolled.

9. It pays to participate in education. Any student who graduates from postsecondary education and borrows will be well-positioned to pay back their loans. Investing in a postsecondary education is an investment for a lifetime and will add, on average, well over $1 million dollars to a person's earning potential.

10. Students benefit from competition in the student loan marketplace. Borrowers obtain savings for on-time repayment, interest rate reductions for direct debit, apply for loans on-line, and make payments more efficiently than ever before.

11. Lenders and schools together have revolutionized financial aid delivery and administration. Thanks to user-friendly, web-based information, it takes some students and families less time to process loans than it takes to fill out forms.

12. Taxpayers pay less today to make and maintain student loans than they did 10 years ago. While the cost of other federal entitlement programs increased by 28% over the past 10 years, the cost to federal taxpayers of the student loan program (FFELP) declined by 58 percent.

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