College Graduates 10 Years Later

Forty percent of Millennials have a bachelor's degree, making them the best-educated generation. They are paying a steep price for those credentials. According to a National Center for Education Statistics' longitudinal survey, nearly three out of four Millennials who earned a bachelor's degree went into debt to pay for their education.  

The NCES's Baccalaureate and Beyond longitudinal survey has been tracking the economic wellbeing of 2007–2008 bachelor's degree recipients. A recent NCES report examines the status of these graduates in 2018, a decade after they earned their degree. Much of the news is good. Sixty-three percent of the graduates owned a home in 2018, for example, compared with only 48 percent of the 30-to-34 age group as a whole (two-thirds of the 2007–08 cohort was under age 35). The median earnings of those who worked full-time amounted to $67,500 compared with $52,000 for all 30-to-34-year-olds with full-time jobs. 

Not all the news is good, however. A substantial 20 percent of 2007–08 college graduates have a negative net worth—meaning their debts exceed their assets, the NCES reports. Among Black college graduates, 37 percent have a negative net worth. Student loans are the reason. Fully 72 percent of the 2007–08 cohort borrowed to pay for their education, owing a cumulative median of $32,116. Among Black graduates, 86 percent borrowed and they owe a larger $51,395. Most of the 2007–08 cohort (55 percent) is still repaying those loans, with an average monthly payment of $427. 

Source: National Center for Education Statistics, Baccalaureate and Beyond: First Look at the 2018 Employment and Educational Experiences of 2007–08 College Graduates

30 Years of Student Loans

Student loans are a ball and chain around the necks of millions of Americans. It didn't used to be this way. The first time the Federal Reserve fielded the Survey of Consumer Finances in 1989, only 8.9 percent of households had student loans. Those households owed a median of just $6,000 (in 2019 dollars) in education debt. Thirty years later in 2019, a much larger 21.4 percent of households had student loans, and they owed a median of $22,000. 

Of course, younger adults carry the biggest burden of student loans. Among householders under age 35, the share with education debt climbed from 17 percent in 1989 to 41 percent in 2019. A growing share of middle-aged householders also have education debt. Take a look...

Percent of households with education debt by age of householder, 1989 and 2019

	2019	1989
Total households	21.4%	8.9%
Under age 35	41.4	17.1
Aged 35 to 44	33.7	10.9
Aged 45 to 54	23.3	7.3
Aged 55 to 64	12.2	4.1
Aged 65 to 74	4.2	NA
Aged 75-plus	NA	NA

NA = Too few cases to make an estimate.

The rise of education debt helps to explain why the net worth of householders under age 55 was lower in 2019 than it was in 1989, after adjusting for inflation. The net worth of householders aged 55 or older increased during those years...

Net worth of households by age of householder, 1989 and 2019 (in 2019 dollars)

	2019	1989	percent change
Total households	$121,800	$93,600	30.1%
Under age 35	14,000	16,200	-13.6
Aged 35 to 44	91,100	112,500	-19.0
Aged 45 to 54	168,800	195,100	-13.5
Aged 55 to 64	213,200	195,300	9.2
Aged 65 to 74	266,100	154,300	72.5
Aged 75-plus	254,900	144,300	76.6

Source: Demo Memo analysis of the Federal Reserve Board's Survey of Consumer Finances

Tripling in Young Adult Households with Student Loans

The percentage of young adult households with student loan debt has tripled over the past few decades, according to a Federal Reserve Bank of St. Louis analysis. Among all households headed by 25-to-34-year-olds, 46 percent had student loans in 2016—three times the 1989 figure. Here is the trend by type of household...

Percent of married-couple householders aged 25 to 34 with student loan debt
2016: 46%
1989: 15%

Percent of cohabiting householders aged 25 to 34 with student loan debt
2016: 50%
1989: 10%

Percent of single-person householders aged 25 to 34 with student loan debt
2016: 45%
1989: 17%

Source: Federal Reserve Bank of St. Louis, As Fewer Young Adults Wed, Married Couples' Wealth Surpasses Others'

Student Loans: How Much Is Owed?

Americans owe nearly $1.5 trillion in student loan debt, more than they owe for auto loans or credit card debt. But what is the maximum amount owed by individual borrowers? That's what the Federal Reserve Bank of St. Louis wanted to figure out. To investigate, Fed researchers used Equifax Consumer Credit Panel data, calculating the maximum loan balance for each borrower between 2000 and 2018, adjusted for inflation.

The median student loan balance is $24,899, according to the findings. But there is great variation in the amount borrowed. More than 20 percent of borrowers owe more than $50,000, and 5 percent owe nearly $100,000 or more. Here are student loan balances by percentile of borrowers...

Student loan balances
20th percentile: $9,703
40th percentile: $19,125
60th percentile: $31,312
80th percentile: $54,497
95th percentile: $99,025
99th percentile: $135,472

Source: Federal Reserve Bank of St. Louis, Are Students Borrowing Too Much? Or Too Little?

Student Loans May Explain Rural Population Decline

Rural counties have been losing population in recent years and urban counties have been growing. One factor behind rural population loss is the migration of young adults from rural to urban areas. What's driving young adults away from their rural homes? Student debt may be a factor, according to a study by the Federal Reserve Board. In an analysis of how student debt affects the migration of young adults in rural areas, the Feds examined Equifax/Federal Reserve Bank of New York Consumer Credit Panel data, comparing student debt levels of young adults in rural areas with changes in their census tract of residence over a six-year time period. These are the findings...

• Young adults with student loans were less likely to remain in rural areas than those without student loans—52 percent of those with student loans were still in a rural area six years later versus 66 percent of those without student loans.
• Young adults with the greatest student loan debt were least likely to remain in rural areas—37 percent of those in the highest quartile of student loan debt were in a rural area six years later versus 73 percent of those in the lowest quartile of debt.
• Young adults who moved to metropolitan areas did better than those who stayed in rural areas. They paid down their loans faster, had higher credit scores, and were more likely to have mortgage debt (own a home).

"With students borrowing at higher rates and in larger amounts to pursue postsecondary education," conclude the Fed researchers, "student loan debt may play an increased role in the dynamics of urban-rural migration."

Source: Federal Reserve Board, Consumer and Community Context, January 2019, "Rural Brain Drain": Examining Millennial Migration Patterns and Student Loan Debt," (PDF)

Rise in Student Loan Debt Accounts for 20% of Homeownership Decline among Young Adults

If student debt had not increased between 2005 and 2014—both in prevalence and in the amount owed—there would be 400,000 additional homeowners in the 24-to-32 age group. This is the finding of a Federal Reserve Board study of the factors behind the steep decline in homeownership among young adults.

The homeownership rate of 24-to-32-year-olds fell from 45 to 36 percent between 2005 and 2014, report the Fed researchers, an 8.8 percentage-point decline. This was much greater than the 3.9 percentage-point decline for the total population. At the same time, the share of the age group that had student debt climbed from 30 to 40 percent, and the average amount owed per capita doubled from $5,000 to $10,000. The researchers calculated how much these increases reduced homeownership, estimating that there would have been 400,000 additional homeowners in the age group if student debt had remained at the 2005 level.

But the increase in student debt accounts for only 2 percentage points of the 8.8 percentage-point decline in the homeownership rate of young adults (20 percent). What accounts for the rest? The Fed researchers suggest that student loan debt affected the credit scores of young adults in the aftermath of the Great Recession. Lower credit scores made it harder for young adults to qualify for a mortgage, resulting in lower rates of homeownership.

Source: Federal Reserve Board, Consumer and Community Context, January 2019, Can Student Loan Debt Explain Low Homeownership Rates for Young Adults? (PDF)

Student Debt in 2017

Average student debt upon graduation grew to $28,650 in 2017, according to the Institute for College Access and Success. This is the debt owed by 2017 graduates from the nation's four-year public and nonprofit colleges. It does not include amounts borrowed by parents for their children. It also does not include the amount owed by graduates of for-profit schools, who typically owe the most.

Overall, 65 percent of 2017 graduates have student loans. The figure varies by state. It was highest in New Hampshire, South Dakota, and West Virginia, where 74 percent of 2017 graduates have student loans. It was lowest in Utah, where only 38 percent have student loan debt. Graduates in Connecticut have the highest average debt ($38,510), followed by Pennsylvania ($36,854), and Rhode Island ($36,250). Average debt is lowest in Utah ($18,838).

In California, the state with the most bachelor's degree recipients, a below-average 50 percent of 2017 graduates have student loans. Those with loans owe an average of $22,785—20 percent less than the average college graduate with debt.

Source: Institute for College Access and Success, Student Debt and the Class of 2017

Student Loan Debt, 1992 to 2016

The percentage of households with student loan debt has more than doubled in the past 24 years, according to an Employee Benefit Research Institute analysis of the Federal Reserve Board's Survey of Consumer Finances. In 2016, 22.3 percent of American households had outstanding student loans, up from 10.5 percent in 1992. The percentage of households with student loans increased substantially in every age group during those years...

Percentage of households with student loans in 2016 (and 1992)
Under age 35: 44.8% (24.4%)
Aged 35 to 44: 34.3% (11.7%)
Aged 45 to 54: 23.7% (5.7%)
Aged 55 to 64: 12.9% (2.9%)
Aged 65-plus: 2.4% (1.2%)

Among households with student loans, the median amount owed has more than tripled, after adjusting for inflation—rising from $5,363 in 1992 to $19,000 in 2016. In the 35-to-44 age group, debt has quadrupled...

Median amount owed for student loans by debtors in 2016 (and 1992); in 2016 dollars
Under age 35: $18,500 ($5,363)
Aged 35 to 44: $20,100 ($4,860)
Aged 45 to 54: $20,000 ($6,201)
Aged 55 to 64: $18,000 ($12,234)
Aged 65-plus: $12,000 ($10,223)

While households with and without student loans are equally likely to have saved in a defined-contribution retirement plan, those without student loans have saved much more. Among householders aged 45 to 54 with a college degree, those without student loans had a median balance of $126,000 in their defined-contribution retirement plan in 2016. Those with student loans had a median balance of $46,000.

Source: Employee Benefit Research Institute, Student Loan Debt: Trends and Implications

Student Loans = Less Retirement Savings

Do student loans prevent young adults from saving for retirement? Yes, finds a study by the Center for Retirement Research. Analyzing data from the National Longitudinal Survey of Youth, researchers at CRR examined differences in 401(k) participation and retirement plan assets at age 30 by student loan status at age 25 for the 1980 to 1984 birth cohort.

The findings: 1) Having student loans at age 25 had no impact on 401(k) participation at age 30, the study found. Among college graduates, 61 to 62 percent participated in a 401(k) regardless of student loan status or size of loan. 2) Having student loans at age 25 had a big impact on retirement plan assets at age 30. Those with no education debt had amassed $18,200 in retirement plan assets by age 30, while those with student loans had saved only half as much, regardless of the amount of debt. "The presence of the loan may be more important than the size of the payments," the study concludes.

Source: Center for Retirement Research at Boston College, Do Young Adults with Student Debt Save Less for Retirement?

Student Loans Delay Homeownership by 7 Years

Student loans are preventing many younger adults from buying a home, according to a survey by the National Association of Realtors and American Student Assistance. Survey respondents were Millennials aged 22 to 35 who are currently repaying their student loans.

Eighty percent of respondents do not own a home, the survey found, and the single biggest reason is student debt. Fully 83 percent of respondents say student loans are causing them to delay home buying. The biggest reason for the delay is their inability to save for a downpayment (cited by 86 percent), followed by feeling financially insecure because of their debt (74 percent). How long will they delay buying a home? A median of seven years.

Student loan debt is also causing younger adults to delay other life decisions. The 55 percent majority of survey respondents say their  debt is causing them to delay starting a family, and 41 percent say it is causing them to delay getting married.

Source: National Association of Realtors and American Student Assistance, Student Loan Debt and Housing Report 2017—When Debt Holds You Back

Education Debt Has Become the Norm

For today's young adults, getting a college degree means going into debt, according to the Federal Reserve Board's Survey of Household Economics and Decision-making. Student loans are nothing new, of course. But in the past, most of those who went to college graduated debt free. Only 28 percent of Boomers (aged 60-plus) with a bachelor's degree, ever had to take out a student loan. Today, student debt is the norm. Among Millennials (under age 30) with a bachelor's degree, 62 percent have had to go into debt to get an education.

This is the percentage of Americans by age and highest degree completed who ever took out loans for their own education...

Some college or certificate
Under age 30: 43%
Aged 30 to 44: 39%
Aged 45 to 59: 24%
Aged 60-plus: 13%

Associate's degree
Under age 30: 54%
Aged 30 to 44: 48%
Aged 45 to 59: 35%
Aged 60-plus: 18%

Bachelor's degree
Under age 30: 62%
Aged 30 to 44: 55%
Aged 45 to 59: 48%
Aged 60-plus: 28%

Graduate degree
Under age 30: 75%
Aged 30 to 44: 64%
Aged 45 to 59: 60%
Aged 60-plus: 36%

Source: Federal Reserve Board, Report on the Economic Well-Being of U.S. Households in 2017

The Racial Wealth Gap Is Replicating

Black households are more likely than White households to have student debt. This is a problem, according to a study by the Federal Reserve Bank of St. Louis. The disparity in student debt is replicating the racial wealth gap in the younger generation.

Using data from the 1997 National Longitudinal Survey of Youth, visiting scholar Fenaba R. Addo of the St. Louis Fed's Center for Household Financial Stability, examines the emerging racial wealth gap among those in the 1997 cohort (first interviewed when they were aged 12 to 16) who graduated from college. Among the graduates, Blacks were less likely than Whites to receive financial help from their parents in paying college expenses—58 percent of Blacks received help versus 72 percent of Whites. The Black college graduates who received help got less than their White counterparts—$4,200 for Blacks versus $11,700 for Whites.

These disparities occurred because Black parents are far less wealthy than White parents. The Black parents in the study had an average net worth of $48,500 versus $174,900 for the White parents. With parents less able to help out, Black students are more likely to depend on student loans, and this is replicating the racial wealth gap. By age 25, according to Addo's findings, the average net worth of the White graduates exceeded that of the Black graduates by 84 percent...

Average net worth of NLSY97 college graduates at age 25
Black: $20,186
White: $37,182

Source: Federal Reserve Bank of St. Louis, Parents' Wealth Helps Explain Racial Disparities in Student Loan Debt

Student Loans: "Worse than We Thought"

"Worse than we thought" — those chilling words are in the title of a Brookings report on student loan debt and repayment. Analyzing data from the Department of Education's Beginning Postsecondary Student survey, a nationally representative longitudinal survey of first-time college students, Brookings' senior fellow Judith Scott-Clayton has produced "the most comprehensive assessment yet of student debt and default from the moment students first enter college to when they are repaying loans up to 20 years later." Her analysis of the 1996 and 2004 college-entry cohorts lays bare so much bad news...

• For the 2004 cohort, "nearly 40 percent may default on their student loans by 2023."
• Behind the sky-high level of default are for-profit schools. For the 2004 cohort, the 12-year default rate for students who ever attended a for-profit school was 43 percent. For those who never attended a for-profit, the default rate was 11 percent.
• "Debt and default among black or African-American college students is at crisis levels." Among Blacks in the 2004 entry cohort who ever attended a for-profit school, the 12-year default rate was 58 percent. 

There's much more bad news in the 10-page report, which concludes: "The results provide support for robust efforts to regulate the for-profit sector, to improve degree attainment and promote income-contingent loan repayment options for all students, and to more fully address the particular challenges faced by college students of color."

Source: The Brookings Institution, The Looming Student Loan Default Crisis is Worse than We Thought

$45,800 Student Loan Balance for College Graduates

Seventy-two percent of 2007-08 bachelor's degree recipients borrowed to pay for their college education, according to a National Center for Education Statistics report. At graduation, they owed an average of $45,800. Four years later in 2012, the 63 percent majority still owed an average of $41,900. Here are the amounts borrowed and owed by 2007–08 college graduates by their post-secondary school enrollment status ...

No further school enrollment
At time of college graduation: 66.4% had borrowed an average of $29,600
Four years after college graduation: 56.5% still owed an average of $24,200

Attended master's degree program
At time of college graduation: 79.1% had borrowed an average of $55,400
Four years after college graduation: 71.4% still owed an average of $52,300

Attended academic doctorate program
At time of college graduation: 59.9% had borrowed an average of $73,600
Four years after college graduation: 54.2% still owed an average of $75,200

Attended professional doctorate program
At time of college graduation: 89.7% had borrowed an average of $131,000
Four years after college graduation: 83.9% still owed an average of $134,100

While these levels of debt are disturbing, there's also good news in the report: "Despite rising student debt levels, the average increase in lifetime earnings from a bachelor's degree relative to a high school diploma still exceeds average student loan debt."

Source: National Center for Education Statistics, The Debt Burden of Bachelor's Degree Recipients

Home Equity Accounts for 32% of Net Worth

The median net worth of the average household was $80,039 in 2013, according to a recently released report from the Census Bureau's 2014 Survey of Income and Program Participation.

The 2014 SIPP includes improvements to questions designed to measure net worth, with new, topic-specific questions about types of assets such as annuities, trusts, businesses owned as investments, and educational savings accounts. Without these changes, notes the report, median net worth may have been as low as $74,083. The revised survey also included a question about student loans.

Here is the composition of net worth for American households, excluding households in the top 1 percent of net worth because their asset ownership is unlike the average...

Composition of household net worth, 2013
Home equity: 32.2%
401(k) accounts: 16.3%
IRA and Keoghs: 10.5%
Stocks, mutual funds: 9.6%
Assets at financial institutions: 9.4%
Business or profession: 5.2%
Rental property: 4.4%
Other real estate: 3.9%
Motor vehicles: 3.3%
Annuities and trusts: 3.0%
Cash value life insurance: 2.8%
Other assets: 3.6%
Unsecured liabilities: –4.7%

The 55 percent majority of households have unsecured liabilities, which include credit card debt,  student loans, medical debt, etc. Overall, 42 percent of households have credit card debt, with a median of $3,000 owed. Twenty percent of households have student loans, and those that do owe a median of $18,000.

Source: Census Bureau, Improvements to Measuring Net Worth of Households: 2013

Why Aren't Millennials Moving?

The nation's geographic mobility rate has dropped to a record low. One factor behind the decline is the Millennial generation—younger adults, the people most likely to move. But younger adults aren't moving like they once did, reports Pew Research Center's Richard Fry. He examined trends in the geographical mobility rate of 25-to-34-year-olds over the past 50-plus years. The mobility rate of the age group was at all-time low of 20 percent in 2016.

Percent of 25-to-34-year-olds who moved in past year
2016: 20%
2000: 26%
1990: 27%
1981: 25%
1963: 26%

What accounts for the decline? One reason is the modest jobs recovery, suggests Fry. Job opportunities are not good enough to entice Millennials to move. Student debt also may be a factor, he says, preventing Millennials from buying homes. A survey of student loan borrowers by American Student Assistance confirms the impact of student debt on mobility. Among people with student loans, 43 percent say their debt has forced them to delay moving out of their parents' home, 46 percent say it has forced them to delay living on their own without roommates, and 57 percent said it has affected their ability to purchase a home.

Source: Pew Research Center, Americans Are Moving at Historically Low Rates, in Part Because Millennials Are Staying Put

Characteristics of Households with Negative Wealth

Fourteen percent of American households have negative wealth—meaning their debts exceed their assets, according to researchers at the Federal Reserve Bank of New York. Analyzing 2015 data from the Fed's Survey of Consumer Expectations, the researchers compared the characteristics of negative wealth households to households with nonnegative wealth, finding such things as...

Households with negative wealth (vs. households with nonnegative wealth)
Average age of householder is 43 (versus 51)
Average annual household income of $39,077 (versus $86,309)
19% are homeowners (versus 75%)
24% are Black or Hispanic (versus 17%)
24% are single mothers (versus 6%)
18% experienced worsening health in past year (versus 11%)

Among households with smallest amount of negative wealth (less than $12,400), credit cards account for the largest share of debt. That's not so for households with greater negative wealth. For those with negative wealth between $-12,500 and -$46,300, student loans are the largest component of debt and account for 40 percent of the total. For those with the most negative wealth (-$47,500 or more), student loans account for an even larger 47 percent of the total.

"Given the importance of student debt in explaining negative household wealth," the researchers conclude, "it is likely that the steady growth in student debt and borrowing, combined with the very slow rate of student loan repayment...has materially contributed and will continue to contribute to negative household wealth and wealth inequality."

Source: Federal Reserve Bank of New York, Liberty Street Economics, Which Households Have Negative Wealth?