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The Costs of Higher Ed
Student Debtors Have Very Low Net Worth

Young people with student debt accumulate far less wealth than their un-indebted peers, according to a new Pew study:

About four-in-ten U.S. households (37%) headed by an adult younger than 40 currently have some student debt—the highest share on record, with the median outstanding student debt load standing at about $13,ooo.

An analysis of the most recent Survey of Consumer Finances finds that households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700). And the wealth gap is also large for households headed by young adults without a bachelor’s degree: Those with no student debt have accumulated roughly nine times as much wealth as debtor households ($10,900 vs. $1,200). This is true despite the fact that debtors and non-debtors have nearly identical household incomes in each group.


The dramatic difference isn’t just due to the burden of student debt; households with student debt were also more likely to accumulate other forms of debt, including vehicular and credit card. The study finds:

Among the young and college educated, the typical total indebtedness (including mortgage debt, vehicle debt and credit cards, as well as student debt) of student debtor households ($137,010) is almost twice the overall debt load of similar households with no student debt ($73,250). Among less-educated households, the total debt load of student debtors ($28,300) is more than ten times that of similar households not owing student debt ($2,500).


The report revealed an alarming trend: While the total debt burden of households without student debt has declined since 2007, the total debt burden of households with student debt has increased. This holds true for all student debtors, whether they completed college or not.

There’s no way to figure out what is behind this huge disparity in wealth accumulation. As the study notes, it’s understandable that young people who went into debt to pay for college also lacked the money to pay for cars and other expenses, and thus borrowed more. The data may also reveal a widening gap between two types of people who go to college: those wealthy enough to afford most if not all of tuition, and those who have to borrow (and keep borrowing) to keep up with the spiraling costs.

Student debt is obviously an enormous burden on a household, and one that seems to set off a domino effect of borrowing. If we want to make sure that college students aren’t feeling the pain of student loans well into middle age (as a recent Gallop poll says they do), we’d better try to make college more affordable. After looking at these figures, can you doubt the severity of the problem?

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  • LivingRock

    If a young person’s first experience with credit is of the federal student loan variety where the gov’t completely mitigates the risk at the time of borrowing, it’s no wonder poor credit habits beyond are formed. I think this is interesting new twist on the student loan debacle. Not only are the loans themselves pervasive, but it’s instilling bad financial practices in young people.

  • AllanDale

    That’s easy to explain: They borrowed in inflated dollars (1000 percent since 1970, the year before Nixon renounced Bretton Woods) but are paying back in deflated dollars extracted from deflating income. You can look forward to a bottom in 2033.

  • rheddles

    The country has been in moral decline for 40 years. This is merely another symptom.

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