The good news: The scourge of student loan debt has shown signs of plateauing. The bad news: The percentage of American families with such debt remains high, doubling from the early 1990s through 2019, according to a new report from the Employee Benefit Research Institute.
Specifically, the percentage of families with student loan debt jumped from 10.5% in 1992 to 22.3% in 2016, then dropped to 21.4% in 2019. While that’s heading in the right direction, it remains a hollow victory.
In its issue brief entitled, “Student Loan Debt: Who Has It and How Much?,” EBRI noted the median outstanding student loan balance skyrocketed 286%, from $5,704 in 1992 to $22,000 in 2019. Meanwhile, the average student loan balance zoomed 224%, from $12,498 to $40,550 during the same period.
Aggregate student loan debt was $1.1 trillion as of 2019.
In so many words, EBRI noted that student loan debt is a Catch-22 situation because while it represents an investment in someone’s future by enabling them to get a college degree, a better job and higher pay, acquiring too much debt in the pursuit of a degree can put a squeeze on a person’s post-college finances and short circuit their long-term financial goals.
For example, EBRI said, people with college degrees and student loans are more likely to take part in a defined contribution retirement plan, but have lower balances in these plans because they’re diverting their retirement savings into loan repayments.
Even worse are those people who took out loans but never got their college degree, which decreases the chance they’ll participate in a defined contribution plan. And if they do, their balances likely are smaller versus college graduates saddled with student loan debt who participate in a defined contribution plan.
“In short, these families end up with the costs but not the benefits of attending college,” EBRI said.
EBRI found that people with student loans tend to have more education and higher incomes. Families whose head of households have an advanced degree had a median student loan debt balance of $61,000, which was tops among various family groups in the study.
Elsewhere, families with a Black/African American head were 50% more likely than families with white, non-Hispanic heads to hold student loan debt—those figures were 30.2% and 20.0%, respectively.
The EBRI report is chock full of facts and figures, but the organization’s bottom-line conclusion is that policy initiatives to address the nation’s crushing student loan debt problem should be targeted to help those with the greatest need.
EBRI noted that two-thirds of student loan debt is held by families with incomes or net worths in the top half of these respective categories.
“Thus, a universal student loan forgiveness program, which has been discussed in some policy circles, would be of greater benefit to those with higher incomes,” EBRI said. “A targeted forgiveness program could focus the help on those most in need.”