Pew Research has compiled a pretty intriguing report on what burgeoning student loan debt is doing to the finances of those young Americans who pursue higher education. There are lots of good charts packed with, sadly, unsurprising data about what a burden this debt is for those just starting out in their careers.
Student debt burdens are weighing on the economic fortunes of younger Americans, as households headed by young adults owing student debt lag far behind their peers in terms of wealth accumulation, according to a new Pew Research Center analysis of government data. About four-in-ten U.S. households (37%) headed by an adult younger than 40 currently have some student debt—the highest share on record, with the median outstanding student debt load standing at about $13,ooo.
An analysis of the recent Survey of Consumer Finances finds that households headed by a college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700). And the wealth gap is also large for households headed by young adults without a bachelor’s degree: Those with no student debt have accumulated roughly nine times as much wealth as debtor households ($10,900 vs. $1,200). This is true despite the fact that debtors and non-debtors have nearly identical household incomes in each group.
I have no idea whether my college loan experience was typical at the time, but back in the early 1980s I had racked up about $7,500 in student loans when I picked up my diploma and began my first job as an engineer making $30,000 a year.
My guess is that most college graduates today who enter the workforce with college loans to service would be quite happy with a 4-to-1 ratio of annual income to debt, which makes paying this off quite manageable. That ratio is probably a lot closer to 1-to-1 today.