#2 - College Part 2: STUDENT DEBT

• According to student loans expert, Mark Kantrowitz,:

  • TODAY, 69% of all college graduates put on that weird ass hat and walk the stage, or in this year’s case, sign into the zoom meeting, with $29,900 in DEBT

  • $1.6 TRILLION

    • $1.1 of which is UNDERGRADUATE debt.

• One of the Key Sources for the episode: Mark Kantrowitz

  • The President of Cerebly Inc--& the Publisher & VP of Research at Savingforcollege.com

TICAS -- Average Debt Study

• Their supporters include Bill & Melinda Gates

• They measured the debt increase per average student (of debt carriers) from 1996 through 2016. Those numbers IN REAL DOLLARS go like this:

  • 1996: $12,750 

  • 2000: $17,350

  • 2004: $18,650

  • 2008: $23,300

  • 2012: $29,400

  • 2016: $29,650

Great Recession of 2008

• States cut funding to colleges--and colleges JACKED UP TUITIONS!

  • Costs went from approximately $23 - $29K from 2008 - 2012. 

  • 4-year college average cost increased by almost  $3,000 per year between ‘08 and 2012

The Federal Government Assistance with student loans

• Federal Loans technically fell between 10-11 & 18-19 

  • But this was due to the number of Full Time Students going down from 13.1 million to 12.3 million over that span

• Subsidized government loans decreased from 34% in 08-09 (peaked at 36% in 10-11) to 19% in 18-19 

  • This is the type of debt that department of education pays the interest while you’re in college

• MEANWHILE Non-subsidized (interest starts immediately) was at 41% in 08-09 and up to 46% in 18-19

  • Students better pay interest or it accrues and compounds and puts you in a way deeper hole

• FURTHERMORE: Non-federal loans, Grad Plus Loans, & Parent Plus loans went from 24% of the pie in 08-09 to 34% in 18-19

  • Back near Great recession levels when the federal government offered significantly less unsubsidized loans

  • These loans generally have higher rates, less flexibility, and worse overall terms

    • All Loan types background HERE

• Colleges have begun giving out more grants since the Great Recession, which has helped soften the blow (they’ve actually really stepped up)

  • Took it from around $21 Billion in 08-09 to around $34 billion by 2013-2014

    • But it’s come back down a bit to around $28 Billion in 2018-2019

  • AND--tuition is rising faster than they can give it out (which wipes out the grants)--and hurt even more the many debt carriers who don’t receive these loans (bottom page 7)

The Rising Parents Debt

• Mark Kantrowitz:

• “Over the last decade, average debt at graduation has increased by 21% for Bachelor;s degree recipients, by 39% for Associates degree recipients, by 50% for Certificate recipients--and BY 53% for parents,”

  • Over last 2 decades

    • And parents again have been hurt the most at 194% growth

  • According to Forbes, from 2014 - 2019, the 60-69 year old demographic saw the largest percentage increase in student loan debt of any age bracket at 71.5%

Student Loan Stats & Trends

• Percent borrowing (69%)

  • 49% were borrowing in 1992-1993 

• EVEN WORSE for 5 year degrees

  • And regardless of public vs private--the average numbers are bad.

• More than half of borrowed money is for public colleges

• Student Loan Debt has now comfortably passed every form of debt besides mortgages

• Number of borrowers 

• 45.1 MILLION Borrowers (all debt, including graduate students)

  • 13.7% of US population as of 2019

• The time table to paying it off is getting longer and longer

  • Average repayment term was 15.5 years by the end of 2018 (page 20)

    • Was 14.5 average 5 years prior

• Percentiles of debt chart data

• Distribution of debt by amount (out of 45.0 million people

• On data pointing back to 2004, every single age group demographic saw an increase year over year in their debt burden

  • New entrants = taking on more debt

CHEAPEST SCHOOLS VS MOST EXPENSIVE SCHOOLS

• Surprisingly, the band of average debt for graduating seniors between the cheapest schools and the most expensive schools is not particularly wide

• Kantrowitz: “Net Price vs. Debt” Stats

  • From the lowest priced schools to the highest net-priced schools (i.e. grants, scholarships, tax-refunds/benefits, etc. all deducted from the total cost)--

    • The debt is large across the board no matter what

    • Band at about $23.5K to $34.5K

• Students often have many different loans to organize

  • Without counting Parent loans on behalf of the student, the average student will typically carry between 8 & 12 student loans

    • They give out different loans for every semester

    • https://www.savingforcollege.com/article/average-student-loan-debt-at-graduation

Recent Bad Trends Picking Up Steam

Private Loans Beginning to pick up Market share again

• Private loans, which tend to have less favorable rates and terms, are slowly on the rise again

  • Private fell from around $22 Billion in 07-08 to around $7.5 Billion in 2010-2011--and was back up to around $11.5 Billion again by 2017-2018

The debt is dispersing across the age brackets.

• Pell Grant Recipients falling farther behind

  • Turns out the recipients are generally at the bottom of the income structure--so, even with the added Pell Grant boosts since The Great Recession, their debt has managed to be even worse than everyone else’s

• Delinquency through the roof since 2009 

  • Consequences that arise from big student loan payments--to say nothing of being in the delinquent hole with a cratering credit score: 

    • Forego grad school because you can’t afford it

    • Can’t buy a home

    • Have to make job decisions based on money and not long term goals/passions

    • Feds might garnish your wages

• Drop OUTS

  • 3.9 Million dropped out between 2015 and 2016

    • Total debt of 28 Billion across them

• Even the people who very much believe in college and its critical importance in society worry about this

• The CEO of Cengage, Michael Hansen said about debt:

  • Students are largely underestimating how long it takes to pay off their student loan debt. This means they’re probably not prepared for the life choices they’ll have to make, like putting off buying a house or starting a family.

    • Women hold more than 60% of the outstanding student debt

NEXT EPISODE: WHAT HAPPENED