Student loan debt is hardly a “crisis”

Here’s an interesting study from the Brookings Institution. It shows that the mean payment-to-income ratio on student loan debt repayments is lower than it was in 1989, which does damage to the claim that student loan debt is the reason why young people are seemingly absent from the home and stock markets.

Ratio of Loan Payments to Income

Hard to argue with that. Additionally, I found this chart from College Board (below) showing that while the number of student borrowers has indeed increased, the average amount borrowed has remained relatively stable since 2002.

The only indication I can find in favor of a student loan debt “crisis” is that the number of borrowers has risen considerably over the past decade. As the chart above shows, the number of undergraduate borrowers has risen from around 5 million in 2002 to upwards of 8 million in 2013.

Of course, my mini-analysis here doesn’t address the fact that twentysomethings’ 6.6 percent unemployment rate remains well above rates for older, more experienced workers. Unemployment, of course, makes payment-to-income ratios on student loan debt worse, leaving less left over to invest in homes and stocks. But I don’t think this is significant toward explaining why young people aren’t investing. 6.6 isn’t super high, and I’m assuming at least some of that number includes twentysomethings without a college education and, therefore, with no student loan debt. In fact, such people are probably over-represented in that 6.6 percent rate.

Finally, it’s interesting that just as much student loan debt is held by 30-39 year olds as by 20-29 year olds. This doesn’t seem intuitive — 30-39 year olds have had much longer time to pay off debt. But throw grad school into the mix, and it begins to make sense. As the chart above shows, graduate students — while representing just 15 percent of student borrowers — take on about three times as much debt as undergraduate students. This debt is usually not in repayment until after or about age 30.

I’ll have a longer, more formal report on this issue coming out soon. I link to that here when it’s available. In the meantime, any thoughts?

1 thought on “Student loan debt is hardly a “crisis”

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