By Chuck Maggio
Student loan debt is now the second highest U.S. consumer debt category — behind only mortgage debt — and higher than both credit cards and auto loans.
A total of 44.2 million Americans hold a total student debt of over $1.4 trillion … that’s about $600 billion more than the total U.S. credit card debt.
The national average student loan debt for the Class of 2016 graduates was $27,900. By state, Pennsylvania led the country with an average debt of over $35,000; while Utah was the lowest at $18,800, and West Virginia was right in the middle at $27,900.
Another pertinent fact is 76 percent of West Virginia’s graduates hold student loan debt, the highest rate in the nation.
Over 90 percent of the $1.4 trillion debt is comprised of federal loans of various types. The default rate on these loans runs more than 11 percent; $67 billion is owed by 4 million borrowers. Another $31 billion is seriously delinquent (over 90 days) and in danger of default.
You and I will be picking up much of the default balance. Should we be concerned?
Here are some benchmarks of average debt per borrower for the class of 2016: Ohio State $27,900; WVU $27,900; Marshall $27,000; MIT $24,900; and surprisingly Harvard $16,700. Private schools typically have higher levels of debt than public schools, Harvard being an interesting exception.
That’s a lot of information to absorb, so what does it mean? To get some perspective let’s look at the job market. The recent low rate of unemployment is being celebrated widely as a healthy sign for the economy. I’m no economist, but several other factors that need to be considered.
For one, wage growth hasn’t kept up with employment. In simplistic terms, it indicates more people are working, but for lower average pay.
However the real elephant in the room is underemployment. According to a report by the Federal Reserve Bank of New York, “Recent graduates are finding it increasingly difficult to secure a job, and those who do find work are often confined to low-wage positions.”
Defining underemployment as a job in which a college degree is typically not required, over 40 percent of recent graduates are underemployed. That could mean they are working jobs such as construction, office work, selling cosmetics online or anything in between.
I don’t mean to scoff at these kinds of jobs, but they don’t require a degree and are likely inadequate to repay a mountain of debt. It calls to question whether a college degree still helps people find good jobs.
The data cited above has been gleaned from a myriad of sources, both government and private. Sources often differ about specific data for various reasons, however I have tried to be conservative and consistent.
This obviously does not purport to solve the student loan debt problem, but I hope it creates an awareness of a growing cancer that if unchecked, will ultimately have a devastating effect on our economy.
Chuck Maggio is a member of The Dominion Post’s Community Advisory Board.