Net Worth Of College Grads With Student Debt Is 20% Less Than High School Grads With No Debt

Net Worth Of College Grads With Student Debt Is 20% Less Than High School Grads With No Debt (ZeroHedge, May 18, 2014):

Yesterday we provided a detailed breakdown of the cost aspects of a college education, particularly for young people who have no choice but to fund their education with student debt, a key part of the equation that the San Fran Fed in its particular cost-benefit “analysis” of college education avoided.

There is much information in the post, but one particular aspect of the Pew analysis that the article was based on, bears repeating and highlighting for all those less than “1%” young Americans debating whether a college education is worth the tens if not hundreds of thousands of dollars in student loans: the median net worth of “young” households, those where the head is younger than 40 years old, is $8,700, or 20% less than not college educated households with no student debt.

Why is this notable? Because as the WSJ reported concurrently, the class of 2014 is the most indebted ever.

“The average Class of 2014 graduate with student-loan debt has to pay back some $33,000, according to an analysis of government data by Mark Kantrowitz, publisher at Edvisors, a group of web sites about planning and paying for college. Even after adjusting for inflation that’s nearly double the amount borrowers had to pay back 20 years ago.”

It gets worse: “A little over 70% of this year’s bachelor’s degree recipients are leaving school with student loans, up from less than half of graduates in the Class of 1994.”

It gets even worse: “From 2005 to 2012, average student loan debt has jumped 35%, adjusting for inflation, while the median salary has actually dropped by 2.2%. If that continues debt burdens could start to become more unwieldy.

Finally, for anyone confused why aside from foreign olligarchs and Wall Street firms buying up high-end and/or distressed real estate, the US housing market will likely never recover, look no further than student debt:

A report this week from the New York Fed looked at how student debt is affecting entry into the housing market. Researchers Meta Brown, Sydnee Caldwell, and Sarah Sutherland found that a smaller proportion of people at age 30 have mortgages that at any time in a decade. But for the first time starting in 2012, having student loans made it less likely that a 30-year-old would have a mortgage.

Now, 30 still is pretty young and perhaps the student debt is just causing workers to put off home purchases for a little while. Separate research from Richard Fry at the Pew Research Center, looked at the debt burdens and net worth of those with and without student debt. Those data showed that for people under 40, the same proportion of college graduates with and without student debt also had mortgage debt. But those data are a little older — they were collected in 2010 — and they include people with much lower student debt burdens. And they also show that people under 40 with student loans had more other debt — credit cards and auto loans — and a lower net worth than their peers without student debt. As student debt gets heavier, it’s also likely to increase those other burdens, and make it harder to afford a house.

To summarize: More hope for the future than actual change now, more debt; more debt, less net worth; less net worth, less current income; less current income, less investment in the economy and future; less investment in the economy, less actual change and even more hope. Rinse. Repeat.

1 thought on “Net Worth Of College Grads With Student Debt Is 20% Less Than High School Grads With No Debt

  1. When college graduates count themselves fortunate to get a $14,00 a hour full time job, what does that tell you?
    No wonder.
    In today’s world, I would not go into debt to go to college either.
    I was fortunate. I went to college when prices were reasonable, and I had assets I could sell in order to pay my way without going into debt. When I graduated, I had a full time job within a month, and billed $18K in the first six weeks. (I only got to keep 35% of that, but it wasn’t bad for a beginner). It was still a land of opportunity, and if you loved working in engineering as I did, such a bright, inquisitive bunch of people, life was pretty darn good.
    I was lucky. I lived in the Golden Age. Now, it has turned to rot…..and it is a distant memory.
    I remind my friends that we were very lucky. We saw a time where the water lifted all boats, and there was opportunity for all. Not since the time of Augustus, had so many people enjoyed so much.
    We had hot and cold running water, and no worry of shortages or disease. We had electric lights, heaters and air conditioners, we had heated swimming pools we could afford to heat (before Enron)…….we had so much, and appreciated so little. Life was so good, then.

    . Our churches were magnificent, and were never locked, same with our beautiful cars and homes. Today, they are kept locked or the angry of the streets will desecrate and strip them of their beauty. We have sunk so far, so quickly. Beggars and homeless appeal to us everywhere……….most safety nets are gone to pay for the endless, useless and unwanted wars. We have evil and corrupt people running things, and have no way to get rid of them, they are like lice……….this nation has turned into a third world toilet.
    If any of mankind does survive, our era will be remembered as the Golden Era…..as short lived as it will prove to be.

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