Report: Student Debt Flattening

The average amount of student debt that 2019 bachelor's degree graduates took on was slightly down from the previous year. The percentage of those students who borrowed also decreased.

This slight decrease and recent flattening of the upward trajectory of student debt measurements is welcome news, according to the Institute for College Access and Success.

TICAS researches student debt and advocates for policy changes to help relieve this burden on students. It also advocates for greater accountability in higher education, particularly of for-profit colleges, and greater affordability.

Its most recent report is the culmination of 15 years of annual analysis of the student debt situation in the United States. The institute presented the report at a virtual webinar with a panel featuring a who's who of higher education.

Senator Elizabeth Warren, formerly a candidate for the Democratic presidential nomination, taped a video for the webinar thanking the institute for its work.

"We are living in unprecedented times," she said. "In the middle of an economy that has been badly hit by the pandemic, student debt is like an anchor pulling our economic ship down, preventing a swift recovery and preventing prosperity for many Americans."

Warren, who has fought for student debt cancellation, said this recession will only make the problem worse if no one takes action. Congress needs to ensure students can attend public institutions for free and invest in historically Black colleges and universities and minority-serving institutions, she said.

"We need to broadly cancel student loan debt and put those monthly payments back into our economy," she said.

‘Encouraging News’

The report used data voluntarily reported by colleges that included 52 percent of all public and nonprofit four-year colleges that grant bachelor's degrees, and represented 79 percent of graduates.

TICAS's analysis found that 62 percent of college seniors who graduated in 2019 had student loan debt, down from 65 percent in the Class of 2018. About 16 percent of the debt held by 2019 graduates was comprised of nonfederal loans, which have fewer protections and repayment options. This was also slightly down, as 17 percent of the debt held by 2018 graduates was comprised of nonfederal loans.

The amount 2019 graduates borrowed also decreased. Those borrowers owed $28,950, on average, down nearly 1 percent from the 2018 average of $29,200.

"What we’ve seen since 2016 is that debt levels have been relatively flat," Debbie Cochrane, executive vice president of the institute, said. "This is encouraging news."

But other experts don't quite agree. Jason Delisle, a resident fellow with the American Enterprise Institute, said there could be other factors at play.

"We are seeing more and more evidence that there are scenarios where students can be harmed because they’re reluctant to take on debt," Delisle said. If students drop out because they are afraid to take on debt, or work so much that their academics suffer, it's harmful, he said. "I would caution people from measuring access and success based solely on student debt."

The report also doesn't include Parent PLUS loans, federal loans that parents can take out to pay for their children's education. The data set used in the report doesn't include those data, Cochrane said.

"We've seen a lot of growth in parent loans," Delisle said, likely because they are not limited. Federal loans for students are limited, and that limit hasn't increased since 2008, which could be why numbers have been flat, he said.

Cochrane said it's hard to say whether loan limits are a factor, as the available data are messy.

"I would theorize that average student debt has continued to rise if you include parent loans," Delisle said.

Others urge the higher education sector to not dwell on this brief plateau. 

"The student debt crisis persists and is projected to get worse because of the COVID-19 crisis," said Kyra Taylor, staff attorney at the National Consumer Law Center. 

Some students are still struggling more than others with student loan debt, she said. The report shows that Black and Latinx borrowers are more likely to struggle making federal loan payments within a year of graduation, Taylor said.

"Other research shows that these same borrowers are significantly more likely to struggle paying down their debt and substantially more likely to go into default," she said. "This report highlights why borrowers -- even borrowers who graduated in 2019 -- need folks on the Hill to act now to provide student loan relief."

Wil Del Pilar, vice president of higher education policy and practice for the Education Trust, agrees.

"States have abdicated their responsibility to fund higher education, and in doing so they’ve shifted the burden of paying for college to students and families," Del Pilar said. "Unfortunately -- though unsurprisingly, given the racial wealth gap -- state divestment from higher education has disproportionately harmed Black students."

Federal intervention is needed to solve these inequities and make college truly affordable, he said. 

"As a start, Congress should at least double the Pell Grant and make good on a debt-free college promise for students from low-income backgrounds," he said.

Disinvestment and Inequities

​The report this year looked back at the institute's 15-year history and the information it accumulated in that time to take a long view of how student debt has changed, and it found that the 2019 numbers still represent a stark increase from years past.

Between 2004 and 2019, the average student debt at colleges in the sample grew by about 56 percent -- from $18,550 to $28,950. It outpaced inflation, which accumulated to 36 percent over the same period, according to the report. 

which was 36 percent in the same time period. Graduates in 2019 were slightly less likely to graduate with debt than graduates in 2004, by about three percentage points.

The average amount of debt at graduation varies widely between states. Utah had the lowest average in 2019 at $17,950, while New Hampshire had the highest average at $39,400. Students in Utah also were nearly half as likely to graduate with debt as those in New Hampshire.

Many states held their place on the debt spectrum over the years, the report also found. High-debt states tend to be in the Northeast, where more students attend private nonprofit colleges, and low-debt states are mostly in the West.

The institute is concerned about the future, as states and institutions push through a global health pandemic and recession, Cochrane said. Recent surveys show that students are facing greater housing and food insecurity and are considering delaying graduation due to the crisis, she said.

State revenue shortfalls are expected to total $555 billion between fiscal years 2020 and 2022.

This is especially concerning, as some states still haven't recovered their higher education appropriations since the Great Recession.

"Once a decade, a recession hits and states make cuts," said James Kvaal, president of TICAS. "That funding is never fully brought back, so funding is ratcheted down over time."

Some of the colleges with high growth in student debt over the last 15 years are now facing steep budget shortfalls due to the recession, the report states. The current crisis doesn't help the continual inequities in higher education, either. Lower-income and Black students are more likely to graduate with debt, and to have more of it. Black graduates in 2016 had almost $8,000 more in cumulative debt than white graduates, up from $5,100 in 2008. About 40 percent of Black graduates also have difficulty paying back federal loans.

The report includes several recommendations to address the student debt issue. The most effective solution, it states, is to investment in college affordability by allocating aid for student financial need, increasing that aid to match the cost of attendance and increasing funding levels to public colleges so they can reduce tuition costs.

Institutionally, colleges must first look at data to see what students are most affected by debt, the report states. Colleges can then create emergency aid funds so students don't have to take on unexpected debt. States can invest more in colleges, improve data systems and set accountability standards for colleges that receive state aid.

More immediately, the report recommends that Congress extend relief for student loan borrowers for the duration of the pandemic and expand that relief to include students who have private loans.

Maxed Out

In a short question-and-answer session after the report was discussed, higher education experts talked about the past and the future of student debt.

Some of the important developments of the last 15 years have been the income-based repayment plan, the creation of graduate PLUS loans and state disinvestment in higher education, panelists said.

TICAS helped build the concept of income-based repayments, said Lauren Asher, an independent consultant and former president of the institute. But there's still room for improvement, in the forms of simplification and better servicing, she said. The payment plan also doesn't address the root issues of student debt -- it just helps alleviate some of the pain for borrowers.

Graduate loans have now become a large issue, said Robert Shireman, a senior fellow at the Century Foundation and former president of TICAS. The creation of graduate PLUS loans, a federal loan option for graduate students, has encouraged colleges to charge more for graduate programs, he said.

"Some colleges have become addicted to these graduate PLUS loans," he said.

There is still work to do in the future, panelists said, and the need to implement solutions to the student debt problem is more imperative now due to the pandemic.

"We have not yet solved how to hold schools accountable for how they serve students," Asher said. "COVID-19 has made the need for accountability and protections more necessary. We will see a return to the egregious debt and rip-offs that we've seen before."

The concept of basic needs, and how those are calculated in financial aid, also needs to shift, said Lande Ajose, senior policy adviser for higher education for California governor Gavin Newsom and a former TICAS board member. Computers and internet access are obviously now essential and need to be treated as such, she said.

Kvaal is somewhat optimistic that things will change, simply because they must.

"What can’t go up must go down. We as a country have maxed out on this strategy of financing education through debt," he said. "We’re going to have to face up to the costs of investing in an education system that we want."