1 in 5 households now hold student debt: Fewer options for grads – and a damper on the nation’s economy

average student debt 1989-2010Just two decades ago, fewer than one in ten households held student debt. Now, rapid increases in the sticker price for college has driven more students and their families to take out loans. For most college seniors, the idea of “working your way through college”  has all but vanished, replaced by the dread of high loan payments.

According to the Pew Research Center, student debt is exploding, with a record one in five households now holding student debt. But it’s not just the total number of borrowers that is increasing – it’s also the size of the loans. In 1989 the average student debt was a manageable $9,634. By 2010 it had nearly tripled, to $26,682.

By way of comparison, in 1989 it took an average graduate 2 years and seven months to pay off their student debt of $9,634 with payments of $350 per month. In 2010, it would take the same graduate 8 years and five months, and they would pay nearly 10 times as much in interest. (Note: This assumes a federal unsubsidized student loan rate of 6.8%).

High levels of student debt – brought on by shifting the cost of higher education to students and families – limits post-college options for graduates, and puts a damper on economic growth. Studies show growing debt-to-income ratios among grads are locking many otherwise-qualified borrowers out of the housing market, and research also indicates individuals with student loans are less likely to start a business, and more likely to delay major purchases such as a car or home.

That’s a worry for Washington’s economy, which – like others – is heavily dependent on strong consumer demand.

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Posted in Educational Opportunity, Higher Education


  1. Bea Kath says:

    Like many of our issues, this one stems from a lack of job market. America’s lack of jobs for recent grads make students put off graduation. As a recent grad myself, I have many peers who are choosing to get their masters degrees simply to put off entering the job market. Although masters degrees are good, it can be difficult to enter the market with a masters but no practical experience.

  2. Winslow P. Kelpfroth says:

    You’ve shown the average debt, but what is the median debt? In our paper this morning an educator wrote that the median student debt is around $8K when one includes tech school and associate degrees as well as the bachelors and higher. That’s not as alarmist as your sources would make one believe.

    • Alex Stone says:


      A good question. The median debt is $13,410 – meaning half of students have more than this amount, and half have less. Nearly 1 in 4 of these households have more than $30,000, and 10% have more than $60,000. This research included all households with student debt, regardless of degree/institution. This study comes from a well-respected research center that uses comparable numbers over the past two decades – and is far from alarmist.

      Another interesting nugget from the report: 40% of all households headed by someone under 35 has student debt. The size and scope of these loans represents a sea change from past generations. The biggest question mark is how this debt will affect our economy and the economic recovery. Studies show it’s already having an impact on home purchases, and other research indicates high student debt is a deterrent to entrepreneurship. Understanding how increasing student debt is contributing to the sluggish recovery is absolutely critical, particularly since our economy is heavily dependent on housing.

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