FINANCING HIGHER EDUCATION
IN THE UNITED STATES
I. Education in the US
II. Post Secondary Education
3. Federal Student Loan Programs
Mary Queen T. Bernardo
Education in the United States
Child education is compulsory.
Public education is universally
LOCAL STATE FEDERAL
• Ages for compulsory education
• Compulsory education requirements can
generally be satisfied by:
educating children in public schools
state-certified private schools,
approved home school program.
5- 8 14 -18
• In most public and private
schools, education is
divided into three levels:
middle school (sometimes
called junior high school
high school (sometimes
referred to as secondary
• In almost all schools at these
levels, children are divided by age
groups into grades:
First Grade (for the youngest children in
twelfth grade, (the final year of high
Post-secondary education, better known as
"college" in the United States, is generally
governed separately from the elementary and
high school system.
• Commonly consists of four years of
study at an institution of higher
• There are 4,495 colleges,
universities, and junior colleges
in the country.
THE EDUCATIONAL LADDER
age range of
area to area.
• In 2008:
36% of enrolled students graduated
from college in four years
57% completed their undergraduate
requirements in six years, at the
same college they first enrolled
• The U.S. ranks 10th among industrial
countries for percentage of adults with
• Like high school, the four undergraduate
grades are commonly called:
• Students traditionally apply for admission
• Schools differ in their competitiveness and
reputation; generally, the most prestigious
schools are private, rather than public.
• Admissions criteria:
involve the rigor and grades earned
in high school courses taken
the students' GPA
standardized test scores (Such as
the SAT or the ACT tests).
• Most colleges also consider more subjective factors
such as a commitment to extracurricular activities,
a personal essay, and an interview.
• Professional degrees offered as graduate
offered after earning at least three years of
undergraduate schooling or after earning a bachelor's
degree depending on the program.
These professional fields do not require a specific
undergraduate major, though medicine, pharmacy, and
dentistry have set prerequisite courses that must be
taken before enrollment.
• Operated either by a division of the state
university or by local special districts subject to
guidance from a state agency.
• May award Associate of Arts (AA) or Associate of
Science (AS) degree after two years.
• Those seeking to continue their education may
transfer to a four-year college or university
(after applying through a similar admissions
process as those applying directly to the four-year
• Some community colleges have automatic
enrollment agreements with a local
four-year college, where the community
college provides the first two years
of study and the university provides
the remaining years of study,
sometimes all in one campus.
Master of Arts (MA),
Master of Science (MS),
Master of Business
Other less common master's degrees
such as Master of Education (MEd),
and Master of Fine Arts (MFA)
Specialist in Education (Ed.S.). (in
between a master's degree and a doctoral
Doctor of Philosophy (Ph.D.)
Doctor of Arts
Doctor of Education
Doctor of Theology
Doctor of Medicine
Doctor of Pharmacy
Doctor of Physical Therapy
Doctor of Osteopathic Medicine
Doctor of Podiatry Medicine
Doctor of Veterinary Medicine,
Doctor of Psychology, or Juris Doctor.
• Some programs, such as medicine and
psychology, have formal apprenticeship
procedures post-graduation, such as
residencies and internships, which must be
completed after graduation and before one
is considered fully trained.
• Other professional programs like law and
business have no formal apprenticeship
requirements after graduation (although
law school graduates must take the bar
exam to legally practice law in nearly all
• The United State’s system of higher
education is widely seen to be the best in the
US colleges and universities offer more
Their graduates receive greater wage
They attract more than twice as many
foreign students as any other country
17 out of 20 research universities in the
world are in the US according to Jiao
FEATURES OF HIGHER
Decentralized structure - the
decision making power is distributed
and the departments and divisions may
have different degrees of
Diverse - America's colleges and universities
differ in many ways. Some are public, others are
independent; some are large urban universities,
some are two-year community colleges, others
small rural campuses. Some offer graduate and
professional programs, others focus primarily on
Three-quarters of full-time undergraduates – attend
About 1/5 attend private non-profit private
A small fringe attend for profit institutions
FEATURES OF HIGHER
Expenditure on Tertiary Education
• The United States spends much more
on higher education than other
• In 2003, it devoted 2.9% of its GDP
to tertiary education. About twice
as much as the Organization for
Economic Co-operation and
Development (OECD) average.
• Public institutions receive most of
their funding from state government
and set tuition fees that are
relatively low by US standards.
• At private schools, fees are higher
and more variable with top-tier
schools (such as Harvard, Chicago
and Stanford) charging between $
32,000 and $ 34,000 a year.
• Student considering going to college faces
the prospect of spending an average $ 10
000 to $ 23 000 a year depending on the
institution (Tuition Charges and living
expenses-include room and board,
transport, books, supplies and
• The median annual earnings of a 20-year-
old high school graduate was $ 22 000 in
Average tuition and Other
FEDERAL STUDENT LOAN PROGRAMS
Student loans in the United States are a form
of financial aid that must be repaid, in
contrast to other forms of financial aid such
as scholarships and grants.
Student loans play a very large role in U.S.
higher education. In most of the rest of the
developed world, higher education is provided
free (or highly subsidized) at the point of
service, and funded through general tax
However, in the U.S., much of higher education
is funded by students and their families and
is viewed as an investment rather than a basic
• Prior to 2010, Federal loans
direct loans--originated and funded directly
by the U.S. Department of Education
guaranteed loans--originated and funded by
private investors, but guaranteed by the
Guaranteed loans were eliminated in 2010 through
the Student Aid and Fiscal Responsibility Act and
replaced with direct loans because of a belief
that guaranteed loans benefited private student
loan companies at taxpayers expense, but did not
• They may be subsidized by the U.S. Government or
may be unsubsidized depending on financial need.
• Both subsidized and unsubsidized loans are
guaranteed by the U.S. Department of
Education either directly or through guaranty
• Both types offer a grace period of six months,
which means that no payments are due until six
months after graduation or after the borrower
becomes a less-than-half-time student without
graduating. Both types have a fairly modest
• Subsidized federal student loans are
only offered to students with a
demonstrated financial need. Financial
need may vary from school to school. For
these loans, the federal government
makes interest payments while the
student is in college.
For example, those who borrow $10,000
during college owe $10,000 upon
• Unsubsidized federal student loans are also
guaranteed by the U.S. Government, but the
government does not pay interest for the student,
rather the interest accrues during college. Nearly
all students are eligible for these loans
regardless of demonstrated need.
For example, those who borrow $10,000 during college
owe $10,000 plus interest upon graduation. For
example, those who borrowed $10,000 and had $2,000
accrue in interest owe $12,000. Interest begins
accruing on the $12,000. The accrued interest is
"capitalized" into the loan amount, and the
borrower begins making payments on the accumulated
total. Students can pay the interest while still in
• Students who borrow money for education
through Stafford loans cannot exceed certain
aggregate limits for subsidized and
• Once both the subsidized and unsubsidized
aggregate limits have been met for both
subsidized and unsubsidized loans, the student
is unable to borrow additional Stafford loans
until they pay back a portion of the borrowed
funds. A student who has paid back some of
these amounts regains eligibility up to the
aggregate limits as before.
Available for both tuition fees and living
Available to almost all students
Albeit up to differing limits
Subsidy levels vary but tend to be light
Repayments can vary with post graduation
• Main Problem with the Stafford Loan Programme
– Low limits on how much students can borrow.
• Usually these are PLUS loans (formerly
standing for "Parent Loan for
• Unlike loans made to students, parents
can borrow much more — usually enough to
cover any gap in the cost of education.
However, there is no grace period:
Payments start immediately.
• The parents are responsible for repayment
on these loans, not the student. Loans to
parents are not a 'cosigner' loan with the
student having equal accountability.
• The parents have signed the master
promissory note to repay the loan and, if
they do not repay the loan, the credit
rating of the parents may suffer.
• Also, parents are advised to consider
"year 4" payments, rather than "year 1"
• What sounds like a "manageable" debt load
of $200 a month in freshman year can
mushroom to a much more daunting $800 a
month by the time four years have been
funded through loans.
• The combination of immediate repayment and
the ability to borrow substantial sums can
• Under new legislation, graduate
students are eligible to receive
PLUS loans in their own names.
These Graduate PLUS loans have the
same interest rates and terms of
Parent PLUS loans.
• Parents should also be aware that
legislation raised the interest
rate on these loans significantly —
to 8.5% on July 1, 2006.
School-based loan program
For undergraduates and graduate
students with exceptional financial
The lender is the school
Disbursement: How the money gets to
student or school?
US Department of Education
US TREASURY DEPARTMENT
Loan Servicer – (most likely the
school you were attending when you
received the loan)
Lender – the organization that made
the loan initially (bank, credit union
or other lending institution)