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Financial Planning > College Planning > Student Loan Debt

Student Debt Isn't Just a 'Young Person Problem': EBRI

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Student loan debt is no longer just a “young person problem,” according to Craig Copeland, senior research associate for the Employee Benefit Research Institute.

The share of families with student loan debt has grown tremendously. It’s more than doubled from 10.5% in 1992 to 22.3% in 2016.

While families headed by people younger than 35 were still more likely to have student loan debt, families with older heads, ages 45 to 64, have became a larger share of those with this debt, according to Copeland.

Nearly 45% of young families had student loan debt in 2016. This is up from 24.4% in 1992.

Meanwhile, more than a third of families headed by 35- to 44-year-olds had student loan debt in 2016, up from the nearly 12% that had student debt in the same age range in 1992.

For those family heads age 45 to 54, nearly 24% are “still shouldering” student loan debt, according to Copeland. Whereas, in 1992, nearly 6% of these families had student debt.

“It’s starting to hit more and more people as you go up the age range,” Copeland said.

In a recent webinar presented by the Employee Benefit Research Institute, Copeland examined data from the Federal Reserve’s Survey of Consumer Finances, a comprehensive government survey on American families’ total wealth, including detailed data on all asset and debt types.

In addition to more people with student debt, the average amount owed has also gone up.

The median amount that’s owed rose from $5,363 in 1992 to $19,000 in 2016, Copeland showed.

The median required monthly payment in 2016 was $200, representing about 3% of the median family income. However, these payments reached more than 10% of family income at the 90th percentile.

“This is a required payment, so this is going to take the loan to the full extent of what the repayment period is,” Copeland added.

The younger group had a higher percentage of their income going toward student loan repayment — 4% of income at the median.

“You’re certainly at a point where that’s going to make a significant difference whether you contribute to a [defined contribution plan] or save for other financial goals,” Copeland said.

Copeland finds that defined contribution retirement plan balances and homeownership rates are lower for those with student loan debt than for those without it.

Looking at families where the heads are younger than 35, Copeland finds that the families with student loans have lower retirement plan balances, regardless of whether they have a college degree.

Of those with a college degree, those with student loan debt have $13,000 in DC plan balances at the median, compared to $20,000 for those with no student debt. For those with some college but no degree, there is a similar difference in balances. Among this group, those with student debt have a DC plan balance of $4,700, compared with $10,000 for those with no student debt.

“We see tremendous differences in the DC plans persist even as we get older,” Copeland said.

For families with heads ages 45 to 54 with a college degree, student loan debtors have a median $46,000 in their DC plan. Meanwhile, those with no student loans have a median balance of $126,000.

“People still have these loans, and in situations where they have a lower DC balance … they’re less likely to be prepared for retirement when they get age 65,” Copeland said.

Looking at homeownership, Copeland found little difference between young families that have student loans versus those that do not (42% vs. 45%).

However, he did find a difference in the older age cohort. Of the families with heads of households ages 45-54, nearly 76% of those with student loans own a home, compared with nearly 85% of those without student loans.

“Certainly it has an impact throughout the rest of your life,” Copeland said.

— Check out Top 10 Colleges With Best Financial Aid Packages: Princeton Review on ThinkAdvisor.


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