It’s an election year and among one of the hottest topics in debates and town hall forums is the future of student loans, debt, and the financial health of the next generation. No matter which side of the aisle you sit on (or even if you have yet to choose a side) you cannot help but admit that student debt in America is reaching crisis level – the over $1 trillion currently owed is second only to home mortgages as the highest form of consumer debt in this country.
But who are all these people who owe so much money?
The faces of student loan debt may be more familiar than you think. In fact, a simple look at the state of student debt in America and who has it, shows that this is a universal problem that defies economic status and family background in a way never seen before. While some demographic groups are clearly more affected than others, no one is safe as the average graduate in 2014 had nearly $30K in personal student debt. A closer look at who owes and why better illustrates why student loans and debt are such a pervasive problem in the United States today as well as why something must be done now.
Debt Has Increased 56% in Only a Decade
Those without the burden of student loan debt anymore may poo-poo the idea that college students today are overburdened by the money they need to go to school, but a quick look at the figures immediately proves this sort of thinking is both dangerous and wrong. In fact, the 10th annual report from The Institute for College Access & Success (TICAS) issued for 2014 found that in the short time they have been gathering data (2004-2014) student debt has gone up a staggering 56%. This is despite the fact that only a slightly larger percentage of students overall are taking loans – 69% in 2014 vs 65% in 2004.
Yet the fact that people are borrowing and the rate at which they are borrowing is far less significant than who the people are who are borrowing all this money. Whereas traditionally student loans have gone to those from less-advantaged backgrounds as a means to allow them access to higher education, the increasing costs of college have led to more middle and even upper class families to go to the bank (or the government at least) to pay for college. College costs have steadily risen by 6-7% per year, twice the rate of inflation, this, coupled with the associated financial strain on all Americans following the 2008 housing bust, has made the need for loans far more universal than most people realize.
Here are some scary statistics to drive this point home, straight from the Pew Research Center:
- In 2012, 69% of college grads had some type of loan – an all-time high
- The demographic experiencing the fastest rate of growth in loan need are families in the highest 20% income bracket where 50% needed to borrow to pay for school vs. less than half that many (24%) in 1992.
- Upper middle class families, too, have an increasing need for loans – 62% of them borrowed in 2012 compared to only 34% in 1992.
- Students with college educated parents are also borrowing at a much higher rate – 61% needed loans in 2012, compared with 30% two decades earlier.
- While their rate of attendance has remained relatively steady at the bachelor’s level, more women are taking out loans as compared to men. In fact, 71% of female students borrowed compared to 67% of males, this is compared to 49% and 50% respectively in 1993.
Where You Live May Matter, Too
Despite the fact that everyone is borrowing more money to pay for college, where a student lives and attends school also has a major impact on final numbers. Some states’ students are much bigger borrowers than others, with their average debt burden ranging greatly from $18,900 to $33,800, according to the TICAS study.
Many factors impact these figures including the cost of in-state tuition, the number of students attending college, and the presence of more pricey private colleges. However, it is still important to note who is borrowing more money:
Top Five Borrowers
- Delaware – $33,808
- New Hampshire – $33,410
- Pennsylvania – $33,264
- Rhode Island – $31,841
- Minnesota – $31,579
Bottom Five Borrowers
- Utah – $18,921
- New Mexico – $18,961
- Nevada – $20,211
- California – $21,382
- Arizona – $22,609
However even these numbers don’t give us the whole picture – which is likely far worse and farther reaching. That is because these numbers only include reports from 59% of public and private universities in each state, significantly leaving out for-profit colleges. Chances are, with these figures, some states may see higher average numbers as would the nation overall.
Looking Forward: The Future of Education, Financial Stability, and National Debt
Whether you attended college in the 2010s like the students from these studies or the early 2000s like me, the burden of student loan debt is something this generation knows all too well. Well over a decade after finishing my own education, I still write a check every month to pay for it, which places a burden on me and my family and keeps me from spending that money on other economic goods and/or debt reduction.
While personally this is a strain, my level of student debt is so much lower than today’s grads who are paying the equivalent of a mortgage every month for school. As a result, our most educated workers are financially crippled, struggling for decades to recoup the costs associated with their education. Yet, a college degree still remains the most powerful way to get and keep employment and any sort of college-level education directly impacts your earnings at an astonishing rate.
As more and more demographics suffer at the cycle of increasing student debt, let’s hope that some solution to ease this burden comes out of this “hot topic”. Otherwise, we will be stuck with a nation of highly-educated, higher paid, but still broke young professionals.
