Google “student loan crisis” and you get 58 million results. Time and time again, we are told that students today, especially those pursuing a four-year degree, are struggling with debt so large that they are more likely to be poor than prosperous.
So, according to conventional wisdom, high school graduates (with the exception of our own children, of course) would be better off giving up a four-year degree and learning a trade in a community college or college program. learning.
There’s a problem with this oft-told story: It just isn’t accurate. America does not have a student loan crisis. And that’s not to say that the late payment rate for those with a bachelor’s degree is significantly lower than for those with an associate’s degree or without a degree, including those without a degree.
Compelling evidence for the absence of a student loan crisis comes from the Federal Reserve’s report on the economic well-being of US households in 2020. An entire chapter of the report is devoted to student loans.
The main conclusions of the Fed
- The proportion of adults late in their payments is much lower when all borrowers are taken into account, including those who have fully paid off this debt. Of those who have already incurred debts for their studies, 9% were in arrears with their payments at the time of the survey, 42% had unpaid debts and were up to date on their payments, and 49% had fully repaid their loans.
- The median amount of student debt in 2020 among those with outstanding debt for their own education was between $ 20,000 and $ 24,999.
- Of those who had past due debt due to their own education, 18% were in arrears with their payments. Those who did not graduate were the most likely to be late. Thirty-one percent of adults with outstanding student loans who had less than an associate’s degree reported being late. This compares to 22% of borrowers with an associate’s degree. The delinquency rate was even lower among borrowers with a bachelor’s degree (9%) or graduate degree (8%).
- The reimbursement status also differed depending on the type of institution attended. More than a quarter of borrowers who attended for-profit institutions were behind in their student loan repayments, compared with 10% who attended public institutions and 5% who attended private non-profit institutions.
It is correct that for student loan borrowers under the age of 40, first generation students and blacks and Hispanics have higher proportions of adults late in their payments: 16% for first generation students vs. 4% for students not belonging to the first generation; 23% for blacks and 20% for Hispanics, compared to 4% for Asians and 6% for whites.
The most important outcome may well be the self-reported well-being of 18-39 year olds depending on educational attainment and student loan status:
- Among those who have never taken out a student loan, 93% of those with a bachelor’s degree or above say they are doing at least well financially, compared to 74% of those with a college or technical or associate degree.
- Of those who have paid off their student loan, 92% of those with a bachelor’s degree or above say they are doing at least well financially, compared to 65% of those with a college or technical or associate degree.
- Among 18-39 year olds who still repay a student loan, 80% with a bachelor’s degree or above say they are doing at least well financially, compared to 52% of those with a college or technical or associate degree.
When asked what changes they would make to their previous education decisions, only 5% of those with a bachelor’s degree or above said they would not go to college or get less education and 35% said they would have completed more studies. This compares with 65% of those with an associate’s degree who said they would have completed more education and 71% of those with a college or technical degree. For example, a large majority of those who have attended university but do not have a bachelor’s degree say they have not done enough education. They also don’t believe the oft-told story that pursuing an education is no longer worth it.
All of this adds up quite conclusively to there is no student loan crisis. Nine percent behind on student loans does not equate to a student loan crisis. A typical loan of $ 20,000 to $ 24,999 does not equate to a student loan crisis.
Even more clearly, we do not have a student loan crisis among recent college graduates with a degree of four years or more. The report shows that delinquency rates for those with a bachelor’s degree or above are much lower than those with an associate’s degree or less. And welfare rates are significantly higher for those with a bachelor’s degree than for those with an associate’s degree or less, both for those who have paid off their student loans and for those who are still in debt.
Lou Glazer is President of Michigan Future Inc.