Trillion Dollar Debt Day

Bias alert:  I graduated college with a LOT of debt.  It was nearly ten years ago, but I was still far above the current average widely reported in the media.  In 3 years, I had paid off all but one loan that was locked at 2.3% interest.  I paid that off two years later due to the fact that Sallie Mae is an absurdly evil company and I was sick of dealing with them.  All in all, I was debt free 20 years earlier than projected and today have zero debt from either my bachelor’s or master’s degree.

Now, all that being said, I guess I can’t feel too left out that I didn’t get invited to the student protest that was Trillion Dollar Debt Day.  Apparently yesterday was the day that total student loan debt in this country hit $1,000,000,000,000.  Want to see it in real time?  Here you go: 

http://www.finaid.org/loans/studentloandebtclock.html

Anyway, student debt is a complicated issue with lots of statistics ripe for dissection.  Actually, the debt really isn’t that complicated….it’s there because college costs have gone up far more than average household income has, and more people are going for both grad and undergrad degrees.  What’s complicated is how people interpret what to do with these statistics.  For example (from the clock website above):  “Student loan debt, on the other hand, as been growing steadily because need-based grants have not been keeping pace with increases in college costs.” Not hard to see what that websites solution would be to this issue.

The 1 trillion number is impressive, but it is not often mentioned how heavily the increase in debt level correlates with how sharply the number of students have gone up.  According to the National Center for Education Statistics “enrollment in degree-granting postsecondary institutions increased by 9 percent between 1989 and 1999. Between 1999 and 2009, enrollment increased 38 percent, from 14.8 million to 20.4 million.”  Nearly 6 million people extra people in 10 years, combined with rising costs and a recession…that will make that number shoot up in a hurry.

In the past 5 years, the average debt per graduating college student (bachelor’s level) has only gone up by about $4000, unadjusted, or $2500 in adjusted dollars.

Year Average Debt Average Debt (2010 $) Median Earnings Median Earnings (2010 $) Debt:Earnings (inflation-adjusted)
2006 $21,100 $22,822 $45,221 $48,912 0.47
2007 21,900 23,032 46,805 49,224 0.47
2008 23,200 23,497 47,094 47,696 0.49
2009 24,000 24,394 47,510 48,289 0.51
2010 25,250 25,250 47,422 47,422 0.53

Sources: Project on Student Debt, U.S. Census American Community Surveys (1-year estimates, 2006-2010), Bureau of Labor Statistics CPI Inflation Calculator.

  You multiply even that amount over 20.4 million however, and the levels start reaching crisis proportion.  Additionally, these “average” numbers, while reported very exactly, are all self reported by the schools.  Also, out of the 2,300 schools they asked, 500 were tossed for identification reasons, and about 300 just didn’t report anything.  This makes these numbers highly suspect.

Overall, I’m not saying there’s not a crisis.  I work in health care, and it’s totally ludicrous to me that while we’re all scrambling to cut costs as fast as we can, higher education is not doing the same. I’ve also had a mortgage for nearly as long as I had my student loans, and I can tell you that my mortgage company has not once pulled any of the disgusting shenanigans that Sallie Mae pulled with my student loans.  I used to have to save my receipts because they, I kid you not, used to ADD small amounts of money to my balance at random.  I would then have to spend 45 minutes on the phone with them proving that this had happened.  I was always right, they would merely “apologize for the misunderstanding”.

However, with this issue, as with so many others, watch the numbers when emotions run high.  People love to throw data at others in these moments, knowing it won’t be questioned.  Business Insider, for example, claims that “For many of you, your degrees won’t matter. One-third of you will land full-time jobs that don’t require them.”  They don’t mention that’s 33% of 500 people who just graduated.  Check back in 5 years, BI, then show me the numbers.