Increases in Undergraduate Debt 2003/2004 to 2011/2012
My holiday visit with in-laws included less discussion of politics this year for obvious reasons but I did have a brief discussion on student debt with one relative. His view of the issue is that since his generation paid for their college no additional cost subsidies are needed. My concern is that the recent increases in costs are having substantial adverse impacts on the current cohort of students.
I am planning several more posts on college costs and their economic and impacts. This post looks at the trend growth of student debt between the 2003/2004 and the 2011/2012 academic years.
The Data: The source of data for this study is the NSPAS database. I was able to access the data from the NCES Power Statistics Portal.
My variable of interest in this post is cumulative amount borrowed in the undergraduate years by people receiving a bachelor’s degree at four-year institutions. I have presented separate tables for private and public four-year institutions.
Three statistics are presented – Average debt for borrowers, the percent of students who borrowed, and the percent of students who borrowed more than $25,000.
The data does not include information on borrowing by parents through the PLUS program.
The statistics describing change in cumulative student debt are presented in the table below.
|Cumulative Under Graduate Student Debt at Four-Year Institutions
2004 to 2012
|Bachelors Degree Four-Year Public|
|Average Debt for Borrowers||$11,958||$18,845||$6,887||57.6%|
|% of Students who Borrowed||56.6||63.5||6.9||12.1%|
|% of Students with debt greater than $25,000||5.3||16.9||11.6||218.7%|
|Bachelors Degree Four-Year Private|
|Average Debt for Borrowers||14,536||22,962||$8,426||58.0%|
|% of Students who Borrowed||66.9||69.1||2.2||3.3%|
|% of Students with debt greater than $25,000||9.6||22.9||13.3||138.0%|
|Both Public and Private Four-Year Programs|
|Average Debt for Borrowers||12,876||20,163||$7,287||56.6%|
|% of Students who Borrowed||60.8||65.2||4.4||7.2%|
|% of Students with debt greater than $25,000||6.8||18.7||11.9||176.4%|
Summary of Statistical Results:
The growth of cumulative student debt among people receiving a bachelor’s degree from a four-year institution was tremendous during this brief eight-year period.
Total debt incurred by student borrowers receiving a bachelor’s degree rose by around 57% over this eight year period.
The proportion of undergraduate bachelor degree students incurring debt rose by 6.9 percentage points at public institutions and 2.2 percentage points at private institutions.
The proportion of undergraduate bachelor degree students incurring more than $25,000 in debt went from 5.3% to 16.9 percent for students at public schools and from 9.6 percent to 22.9 percent for students at private institutions.
Other Student Debt Trends
These issues will be addressed in future posts.
The expansion of PLUS loans to parents:
Increases in the use of private debt:
Changes in debt incurred by graduate students:
Changes in the number of students with excessive levels of student debt:
Economic Financial and Social Implications:
Economic issues related to the increase in student debt include – (1) A decision by many young people to live with parents and delays in starting a family, (2) a decision to delay home purchases, (3) the choice between a 30-year and 15-year mortgage, and (4) a decision to delay placing funds in a 401(k) plan.
Many older financial experts do not agree with the decision by many in the current generation to delay home purchases and delay saving for retirement.
My view is that the older generation is not in fully touch with the economic realities facing many in the millennial generation from the explosion in student debt occurring over a mere eight years.
I am planning a lot more empirical work on this issue.
Some of my previous work examines proposal to provide financial relief to some debtors who get over their head in debt. Here are some examples:
Seven Ways to Provide Debt Relief:
Is IBR the best way to provide student loan debt relief:
In addition, I have a short book on Kindle on managing debt and the impact of debt on lifetime savings.
The Nine Essays on Debt and Your Retirement: