Increasing levels of college student loan debt don’t appear to be having a significant effect on enrollments. But higher debt is affecting the economy as a whole and it is having a disproportionate impact on low-income borrowers and students who attended for-profit colleges.
A story in Forbes reported on a new poll by LendUSA/WhatsGoodly where millennials said that student loan debt was a bigger threat than North Korea. Financial analyst Suze Orman wrote several years ago that student loans were the single most dangerous threat to our economy. Just how much of a threat is increasing student debt—to higher education, to the housing market, to recent college graduates’ prosperity?
There’s no question that recent graduates are leaving college with more student loan debt. More students are taking out loans and they’re borrowing larger amounts. Total college student loan debt was $1.3 trillion at the end of 2016—an increase of about 170 percent from 10 years earlier, according to the Federal Reserve Bank of New York. The average debt is now about $30,000. It has been argued that college student loan debt is influencing job choices, home ownership and even the marriage rate. But apocryphal stories about students owing $100,000 or more coming out of college don’t represent the reality for most borrowers. In 2015, roughly two-thirds of student loan balances were $25,000 or less (see below).
Fewer than 5 percent owed more than $100,000 However, this 5 percent of borrowers accounted for 30 percent of total debt, as shown in the following chart.