The Cleveland Fed, in its post, states that student debt, as of 2010, averaged $16,714, nearly a 400 percent increase since 1989. [This number is significantly lower than the Project on Student Debt’s estimate of $29,400 because the Project on Student Debt only includes those who take on debt, whereas the Cleveland Fed estimates incude all students, even if they don’t take on debt. Furthermore, the Cleveland Fed focuses on the student debt of those who head households AND are aged 22-29].
However, while most people who read this are going to be caught by the headline, the most important aspect of the report may go overlooked in other media reports. The Cleveland Fed’s report provides data that should emphasize that, if you go to college, it is imperative to graduate.
Looking at households led by those aged 22-29, the Cleveland Fed compared debt of those who graduated college, who attended some college without graduating and who did not attend college. This is what they found:
(note: it is important to note that looking at households aged 22-29 can significantly discount the average sudent debt of a student. Many students who take on student debt may not be head of household for data purposes).
The rise of student debt across all three sectors is problematic. Dealing with this debt is more difficult, as wages have not kept up with the rises in average debt levels. Furthermore, students who take on debt for college but do not graduate are in financially worse situations, on average, than those who simply went from high school into the labor force.
(note: this measure may overestimate the earnings of all three sectors, as underemployed or underpaid individuals are less likely to head households)
It’s quite important to emphasize that many students fail to graduate, but do so with debt. The 2009 Degreeless in Debt report states the following:
- 29% of borrowers who began in 2003-2004 dropped out of school without a degree.
- Those who dropped out had higher unemployment rates and made less money than those who graduated.
- Borrowers who dropped out were more than four times more likely to default on their loans.
So, college, on average, is worth it, even with the massive increases in tuition over the past three decades. However, it is, on average, only worth it if you graduate.