Student Loan Debt Not a 'National Crisis,' Data Shows

Student Loan Debt Not a 'National Crisis,' Data Shows

Despite a vocal minority who claim they face a "student loan crisis" that threatens their financial future - one in which, as college graduates, they labor to repay overwhelming amounts of federal and private student loan debt - a surprisingly large number of college students actually graduate with little or no debt from student loans, according to recent data.
"Most people borrow a reasonable amount of money, they pay it back, and they are better for having gone to college," said Michael McPherson, president of the Spencer Foundation, an educational research organization.

About one in three college graduates leaves school without any education debt, according to data compiled by the U.S. Department of Education. Of those students who earned a bachelor's degree in the 2007-08 academic year, 34 percent graduated with no debt from student loans - a figure that has held steady over the past four years.

When considering the larger pool of student who received some type of higher education degree or certificate, the percentage of non-borrowing students was even higher: 41 percent of the students who earned either a two-year or four-year degree or certificate in 2007-08 graduated with no student loan debt.

Overall, among the 66 percent of bachelor's degree recipients in 2007-08 who graduated with debt from college loans, 62 percent took out federal student loans and 33 percent took out private student loans, with many students having turned to both federal and private sources for their student loans.

These figures, the latest available, come from the Department of Education's National Postsecondary Student Aid Study, which is conducted every four years.

Student Loan Debt Levels: On the Rise, but Mostly Manageable

Although the proportion of bachelor's degree-earning students who graduated with no education debt remained virtually unchanged in 2007-08 from 2003-04 - at 34 percent compared to 33 percent in the previous NPSAS report - the average amount that students borrowed in college loans has grown.

However, even with these increases in student loan borrowing amounts, the average debt load from student loans has still remained at less than $20,000, the College Board reported in a policy brief summarizing the results of the latest NPSAS ("How Much Are College Students Borrowing?," August 2009).

Among bachelor's-earning graduates who did take out student loans, the median student loan debt was $19,999 in 2007-08, up just 5 percent from $18,973 four years earlier, when adjusted for inflation. For all degree- and certificate-earning students in 2007-08, the median student loan debt was $15,123, up 11 percent from $13,663 in 2003-04.

"People think students are drowning in debt, and there is a small proportion of students that borrow an exorbitant amount," said Sandy Baum, an author of the College Board's brief, "but most students graduate with a manageable debt load."

'Overborrowers' of Student Loans in the Minority

Only 10 percent of those students who received a bachelor's degree in 2007-08 - and just 6 percent of all students who earned some sort of degree or certificate - borrowed more than $40,000, over twice the national average, in student loans.

But it is this minority of student loan borrowers, the "overborrowers," who tend to capture a majority of the media attention and for whom repaying their student loan debt can be a serious financial struggle, writes Robin Wilson for The Chronicle of Higher Education ("A Lifetime of Student Debt? Not Likely," May 22, 2009).

These borrowers, overwhelmed by student loan debt and high monthly payments, may fall into delinquency or default and have difficulties paying for their other bills and basic expenses, qualifying for credit cards or a mortgage, or even finding a job, now that more employers are including a credit review as part of the job application process.

"There are some really poignant, painful stories," McPherson, of the Spencer Foundation, acknowledged. "But they aren't the typical American experience."