Richard Van Heertum
In 2006, the Village Voice published a series, Generation Debt: The New Economics of Being Young., that perfectly captured the nascent problem of student loan debt. While stories about student debt loads had been in the news for a few years, those series of articles perfectly captured the precarious financial position recent graduates are placed in by the shift from parental financing and aid to loans as the major source of funding for college. As many, including John Oliver have argued, this is a national crisis with far-reaching implications. Included below are six facts about the crisis, including two on how addressing it could be beneficial to us all.
A decent society wouldn’t push millions of student into debt. It would recognize that higher education isn’t mainly a personal investment. It is a public good.
– Robert Reich
1. Student Loan Debt at Record Levels
Students are more saddled with student loan debt than at any time in history, with 44.2 million borrowers (14 percent of the population) owing over $1.4 trillion. It is now the second highest consumer debt category (Forbes), behind only mortgage debt, and $620 billion more than all the credit card debt in the country (some of which is student loan debt itself). The average for the graduating class of 2016 ($37,172) is up six percent from just last year.
In 2012, 71 percent of students graduating from four-year colleges had student loan debt:
- In total, 1.3 million students graduated with debt, an increase from 1.1 million in 2008
- 66 percent of graduates from public colleges had loans (average debt of $25,550)
- 75 percent of graduates from private, nonprofit colleges had loans (average debt of $32,300)
- 88 percent of graduates from for-profit colleges had loans (average debt of $39,950)
2. Default Rates Rising
The number of defaulted federal student loans hit a new high in 2016: about 8 million borrowers have given up paying on more than $137 billion in education debts. That means at least one out of every six people (11.2%) who have federal student debt haven’t made a payment on their loans for at least nine months. In fact, 1.1 million student borrowers defaulted for the first time in 2016. Overall, the total amount of defaulted federal student debt grew by about 14% in 2016. Even as the economy has recovered from the financial crash of 2007 and unemployment hit record lows, defaults are still on the rise.
STUDENT DEBT STATISTICS BY LOAN STATUS (DIRECT LOAN PROGRAM)
Debt (in billions)
|# of Borrowers
People (in millions)
|Loans in Repayment||$478.6||15.7|
|Loans in Deferment||$107.3||3.5|
|Loans in Forbearance||$96.2||2.6|
|Loans in Default||$67.5||4.0|
|Loans in Grace Period||$50.1||2.0|
It’s inevitable at some point there will be a cap on student loan guarantees. And when that happens you’re going to see a repeat of what we saw in the housing market: when easy credit for buying or flipping a house disappeared we saw a collapse in the price housing, and we’re going to see that same collapse in the price of student tuition, and that’s going to lead to colleges going out of business.
– Mark Cuban
3. Returns on Investment (ROI) in Education Declining
One of the most troubling aspects of the student loan debt crisis is the very real possibility that students will now make the rational choice not to attend post-secondary education at all. In 2010, at the tail end of the financial collapse of 2007-08, a full 50 percent of recent graduates were either underemployed (25%) or unemployed (25%). Those numbers have improved in recent years, but there are still troubling returns on investment in many majors and schools across the country. The main reason is the extraordinary increase in tuition over the past few decades, rising five times the rate of inflation since 1983. It is compounded by a weak job market for high-skill, high paid jobs, with a report by McKinsey finding that 42% of recent graduates are in jobs that require less than a four-year college education. Some 41% of graduates from the nation’s top colleges could not find jobs in their chosen field; and half of all graduates said they would choose a different major or school if given the chance to start over.
College has gotten significantly less affordable, especially over the past decade when tuition growth has continued unabated while income growth has stagnated and the job market has gotten much tougher for new grads.
– Jeremy Kisner, president of SureVest Capital Management Opens a New Window.
4. Particularly Harsh on Women
Women are now the majority on college campuses across the United States, representing 56% of all students enrolled as of Fall 2016. And according to a new report, they’re also shouldering the lion’s share of the nation’s student debt problem. A report by the American Association of University Women (AAUW) found that on average, women hold $833 billion – or almost two-thirds – of the country’s student debt, compared to $477 billion for men.
I currently have over $250,000 worth of student loan debt (both private and federal). Most of this debt was taken out by my parents who at the time thought they would be able to pay it back. Unfortunately, the economic recession made this impossible. Despite the best intentions of my parents, I am left with crippling debt that cannot possibly be paid back since I am a high school teacher.
Although I am a public employee, I feel that the government has severely let my generation down. At 29 years old, I cannot buy a home or start a family and I constantly have to worry about being able to pay my bills each month. It pains me to think about how my generation could be contributing to society and the economy if it weren’t for this horrible burden.
Now in 2017, I fear the future of public education. As an AP government teacher, I can’t help but feel disillusioned by the system. I am proud of the education I received and know that it has benefitted my students. Yet, instead of law, I chose education because of the Public Service Loan Forgiveness Program. If this program is not honored under the Trump administration, I fear I will never be able to be self-sufficient and start a family in the competitive economic environment of New York.
Overall, after completing a bachelor’s degree, women’s average accrued student debt is about $1,500 greater than men’s. The situation is particularly acute for African American women, who take on more student debt than any other group of women, with an average of $30,000. The AAUW estimates that women make 20% less than men four years after graduating with a bachelor’s degree. That pay discrepancy leaves women with less disposable income to use to pay back their loans, meaning that they take more time to pay back their debt than men. In the time period between one and four years after graduation, men paid off an average of 38% of their outstanding debt, while women paid off only 31%, according to the study.
Finally, about one-third of women experience financial difficulties, including covering living expenses, while paying off their loans, compared to just one in four men. And a full 57% of African American women repaying student loans say they were unable to meet essential expenses within the past year.
5. Would be Boon to Economy if Forgiven
One of the arguments one hears less than they should regarding the student debt crisis is the economic stimulus forgiving some or all of that debt would create. To put it simply, 44 million Americans are putting a big chunk of their disposable monthly income towards their student debt, which could instead go toward goods and services.
Instead of helping our students, the government is making a profit on student loans…That is wrong. It is morally wrong. That is obscene.
– Elizabeth Warren, Senator
Not surprisingly, research shows that student loan borrowers choose to spend less than they otherwise would, or simply cannot afford to spend on items they would otherwise purchase. Nearly half of student loan borrowers have put off buying a car because of their student loan debt, according to a survey from last year, 41 percent have delayed buying a home and 27 percent haven’t even managed to make it out of their parent’s home yet. A third of shoppers said they would limit holiday spending due to student debt. And 25 percent of graduates with higher student loan balances (more than $25,000) are delaying their plans to start a business due to those debts.
6. Undermine the Arts, Public Defense and Working to Make the World a Better Place
An even less reported element of the student loan debt crisis is the fact that it is doing profound harm to the arts, non-profits, district attorney offices and other fields that generally pay lower salaries, disallowing many graduates from engaging in activities that could enrich and improve our world. District Attorney’s Offices across the country complain that they are having a harder and harder time finding top tier candidates to serve in their offices, there is deficit of quality public defenders as well and non-profits are having difficulty attracting top notch talent. The same can be said of the arts, where hundreds of thousands of fine arts graduates seek employment outside their training or give up on the arts completely. This problem stretches beyond the arts, as well, as creative resources are being wasted as more and more graduates find themselves underemployed or whittling their talents away in the underpaid gig economy.
I borrowed 17k in 1992-1994. The school told us we would make 60 k upon graduation. I started at 27k. Due to years of injuries and just plain bad luck, I have not been able to pay down this debt. It is now over 100k. It was doubled at some point for an erroneous chapter 7 entry by city bank. I had to file chapter 7 this year among surgeries and job changes. I work as a contractor and I will have to throw in the towel. It will cause me to be a scofflaw and in breach of the contract so I will be black listed by OPM and stop supporting the Armed forces after 8 years of commitment. AND 20 years of volunteer work with the New York Guard, Army division. I lived to support the troops. I am now under treatment for depression partly because I cannot see a way forward. There is no way out even after 20 years the government will not let go and take some of my retirement. I suppose.
Don’t let student debt destroy more and more lives. Call your Member of Congress, and demand Affordable and debt-free college, and allow students to refinance student loan debt to take advantage of lower interest rates, and support debt-free college!
Richard has a PhD from UCLA in cultural studies and education and an MA in Economics from SDSU. He has taught at UCLA, CUNY, the Art Institute, Drexel and NYFA. Richard has published three books, The Selling of Bohemia (2015, RJV Books), Educating the Global Citizen: Globalization, educational reform, and the politics of equity and inclusion (2011, Bentham) and Hollywood Exploited: Corporate movies, public pedagogy and cultural crisis (2010, Palgrave). He has presented at 19 conferences, published over 25 academic essays and chapters and hundreds of articles in the popular press on movies, music, politics and sports (Sidelines, Principally Uncertain, Ashbury Bay Press, Style Weekly, LA Weekly, San Diego Reader, San Diego Union Tribune, Slamm, etc.).