You wouldn’t think so would you? We hear constant doomsday tales that the world is about to end because of the 6 figure student loan debt every 20-something is carrying around. It’s simply impossible to graduate college in the United States without a trail of loans following. Right?
Average amount of debt as of 2012: $29,400
Median amount of debt as of 2010: $8,500
Percentage of students with debt over $100,000: 4%
Those numbers are not nearly the horror show the media pretends they represent. The average is only $30,000, or the price of a brand new loaded Honda Accord. The average also is just that: an average. If I owe $200,000 for my degree and you owe $15,000, our average is $107,500. You can see how extreme borrowers distort the statistic.
Moving on to the median, which I think is a much more useful metric, we see even more good news. Half of students owe less than $8,500. That’s freakin’ amazing!
Finally, those with with the oft-whined about six-figure debt load only register 4% of borrowers.
But the best part, according to a report from the Brookings Institution, is that households with debt today are better off overall thanks to the increase in income provided by a college degree. This chart illustrates the point:
The investment in an undergrad education has never been more worth it. Median weekly earnings for those holding a bachelor’s reached $1,108 in 2013. Median earnings for those with a high school diploma? $651. An education in skilled labor (the trades) also has a high return on investment, given the relatively low cost of training.
For those with high levels of student loan debt, repayment plans are generous. Federal loans currently allow you to choose between the following plans:
- Standard repayment
- Graduated repayment
- Income based
- Income contingent
- Income sensitive
- Extended graduated*
If your income is low enough, a few of these plans can result in a payment due of $0.
These flexible plans are what allowed me to borrow the ridiculous sum of $70,000, yet have minimum payments of $475 with protection if I should lose my job. That amount is ~17% of my take-home income and I wish I had borrowed less.
The point is that I borrowed the money. I got the education I wanted, a fancy undergrad lifestyle filled with my own apartment, weekend drinking binges, and a study abroad trip to Europe. Those things cost money.
There is no student loan crisis. Most students are not borrowing extreme amounts. Most graduates are receiving an income boost that makes the return on investment extremely lucrative.
*You must owe $30,000 or more to be eligible for these plans.