November 21, 2023
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Student loan debt is a problem for everyone


By David Church

The college experience is one I would never propose to deny anyone. I enjoyed my undergraduate experience at the University of Southern California and earning my MBA at UCLA. My undergrad college years were probably some of the most enjoyable years of my life.

However, I would gladly do without the massive student loan debt that I still carry to this day.

With that balance of fun memories and debt in mind, there is a prevalent public perception that student loan debt is really just a “young person’s problem.” I assume the thought process is that young graduates come out of college and pay off their student loan debt in a few years, and then pursue lives of financial prudence.

The real-life data, unfortunately, don’t jibe with this assumption that we can age out of student loan debt. The average student loan balance is about $25,000 for all age groups, according to the Federal Reserve Bank of New York. These darn young people will learn, right?

But student loan debt is not just impacting young people. The average student loan balance for those over 60 years of age is almost $20,000. Let’s think about that for a moment. The average student loan debt for all age groups is $25,000, and for those over 60 it is only $5,000 less, on average.

Now we should keep in mind that people are returning to college at all ages, in part thanks to the revolution of the academic system in making access to college degrees so much more convenient through evening and online courses and other changes.

The Federal Reserve Bank of New York has a great chart that shows student loan debt by age groups. It’s interesting to point out that not only is student debt growing at all age groups, but the largest amount actually belongs to the 30-to-39-years age bracket. They account for one-third of total student loan balances. As I happen to fall in that bracket, barely, I’m flattered to be labeled young. Reality, though, is that we see student loan balances increase at all age groups.

If we agree on the reality that all ages are impacted by student loan debt balances, and that I am young, let’s ask why we should care about this financial fact. The truth of the matter is that student loan debt is relatively easy to secure when in college and it is uniquely structured.

Unlike most unsecured debt, such as credit card debt and personal loans, student loans are very difficult to discharge through bankruptcy. As of 2014, per the Federal Reserve Bank of New York, credit card debt totaled about $659 billion, auto loans totaled about $875 billion and student loans totaled over $1.1 trillion. Student loan debt is second only to home loan debt. Our total student loan debt is more than the entire country of Mexico’s 2016 gross domestic product, the 15th largest GDP in the world. Just our student loan debt exceeds that.

Now we may start to see why we should care that student loan debt impacts all age categories, is very “sticky” or hard to discharge, and is the second largest debt category. This category of debt is having macroeconomic impacts.
One of the many reasons the U.S. economy was slow to recover from the last recession is the anchor effect student loans have on so many.

Student loan debt also is likely a factor in lower homeownership rates. It can be more difficult for home loan applicants to qualify for mortgages if their debt-to-income ratio is impacted by student loans.

Higher education remains a transformative experience that will ultimately position societies to remain competitive, as well as face the challenges the future has in store. However, as a society we’ll also need to look closely at student loans at a macro level and understand different options and avenues.

— David Church, who has a master’s degree in business administration, is an adjunct faculty member in the California Lutheran University School of Management.