Researchers have once again discovered water is wet. A new Pew Research Center study out today shows students that emerge from college with no student loan debt have a higher net worth than those who do. I wonder if Pew used a loan to fund the study? The Center followed young Americans, defined as those being under 40 with and without student loans.
The findings? If you are saddled with student loans, your average net worth is $8,700. Young Americans without the burden of student loans had seven times the wealth, with the average being $64,700. No difference of income was found among these college-educated Americans, so toss out any wealth inequality gap arguments on this one. It is a direct shot at the student loan system.
As for the study, it’s not exactly headline shocking. Anyone with basic common sense knows this is an issue. During the 2008 financial crisis and recession that followed, student loan debt was the only kind of debt to rise during the period. The whole go for retraining and get a job mantra. How’s that working out again? Sure, the unemployment rate looks rosy, but our labor participation looks like the 1970s.
If you weren’t a math major, that means there are a lot of working age Americans just sitting at the house. The argument gets made that’s due to the baby-boomer retirement spree, but lets save our own special demographic time bomb for another day.
Student loans have exploded since 2001. During that period, a head of the household with student loan debt made up 22 percent – when looking at young adults. In 2010, that figure had jumped to nearly 40 percent. The median balance left to pay off was around $13,000, but the figures vary wildly and are likely skewed higher today.
Student Loans Lead to Other Debt
If a young adult has a student loan balance, they are more likely to carry other debt. The average debt load for those households was $137,010, which included vehicles, credit cards and mortgages. Those without the burden of student loans had half the debt load.
Earning the bachelor’s degree is still a wise investment, if you are in the right field. The blanket statement of go to college just does not work in the new normal. Several movements have tried to get more student loan forgiveness to unshackle young Americans from the cycle of debt. There has been little success on that front, and until a crisis develops, it will likely stay that way.