Household student debt on the rise

6 months 3 weeks 3 days ago Thursday, May 18 2017 May 18, 2017 Thursday, May 18, 2017 1:55:00 PM UTC May 18, 2017 in News
By: Evan Lachnit, KOMU 8 Reporter
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COLUMBIA - Student loan debt is higher than ever and student debt now accounts for nearly 11 cents of every dollar of debt for households. 

That is according to the Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York. 

The report shows the amount of student loan debt per household has tripled over the last 15 years. 

1.34 trillion dollars of household debt comes from student loan debt. That is about 10 and a half percent of the total 12.73 billion dollars of household debt.

Overall, household debt surpassed the levels seen during the economic recession in 2008 in this latest report. 

Joe Haslag, who is an economic professor and Kenneth Lay Chair for economics at MU, says despite the rising levels of student debt, going to college is still worth the expense. 

Haslag says when you compare students who forgo four or so years of income to go to college to students who work right away out of high school, historical averages show students who went to college get a return on their investment. 

"The extra income earned by a college graduate converted into what it is worth today is about 600,000 dollars at least," Haslag said. "So if it costs a couple hundred thousand dollars to go to a university even, it would seem like it well it is worth it." 

Haslag said the student loan market does not work like most markets do. He also said he does not think the risk is properly included in the price of interest rates for student loans.

The Federal Reserve Bank of New York report said delinquency rates for student loan debt "are likely to understate effective delinquency rates because about half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle." 

"There is evidence from the Federal Reserve Bank of New York study which suggest that even liberal arts majors are getting a pretty good rate of return on their college experience, on average," Haslag said. 

He said based on the average returns seen, the real question is why more people do not go to college. 

"Of course that would alter the supply of college educated grads and probably drive down the wages that are earned by college educated grads and that college premium would begin to shrink if everyone got a university degree," Haslag said. "But right now you could make the case it is well worth going to an university." 

This comes as there is a proposed 2.1 percent increase in tuition for resident undergraduate students for all four UM campuses. 

 

 

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