Student Loans: A Look at the Data

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We hear it often, and the problem is real: The average total cost of attending college in the U.S. (tuition, fees, room, and board) has been going up much faster than U.S. household income since the 1980s.1


We also know that student borrowing has been steadily going up in the U.S. since the mid-2000s. Total outstanding federal student loans at the end of 2007 were $516 billion across 28.3 million borrowers.2 Total federal student loans have grown to $1.34 trillion across 44.3 million borrowers as of the third quarter of 2017.3 That’s a nearly $1 trillion increase in just 10 years.


A rough back-of-the-envelope calculation using these figures tells us that the average federal loan amount in 2007 was $18,233, and it was $30,296 in the third quarter of 2017. Keep in mind that those amounts do not necessarily represent the only loans that borrowers may have taken out to fund their college education. There are other sources of loans that students and families utilize, often in combination with federal loans, such as state loan programs and private educational loans from banks. Those amounts are not included in these 2007 and 2017 figures. This point will be important below.


When it comes to student loan debt, the picture is daunting even when just looking at federal loans. In the last 10 years, the total amount of federal loans that have been given out has grown almost threefold (a 2.6 percent increase, to be exact) and there has been a nearly twofold increase in the average individual federal student loan (a 70 percent increase, to be exact). That means more people are borrowing money to get additional educational credentials after high school, and student borrowers are having to borrow larger amounts of money in order to get those credentials.


If you are just interested in taking out student loans to get a bachelor’s degree, a brief caveat: There is information in the numbers I just gave you that skews the average loan amount. You want to know what kind of student loans you will take out if you go get a bachelor’s degree, right? Well, those total and average loan amounts I stated include everyone who has a student loan from the federal government. Students who got a bachelor’s degree are in there, of course, but so are people who took out loans to get a bachelor’s degree and also took out loans to go to graduate school. This is important, because people who go to graduate school after their bachelor’s degree tend to have larger student loans than those who received a bachelor’s degree; graduate school loans together make up approximately 35 percent of all outstanding federal loans. That makes it harder to understand just how much you may potentially borrow for a bachelor’s degree, when the bigger loan amounts for graduate degrees you may not be seeking (e.g., master’s and doctoral degrees) make the overall average student loan amount higher.


Imagine if you wanted to buy an inexpensive car (like a Kia) and wanted to know what the average car loan amount and monthly payment was for those cars. If I told you the average car loan amount across all auto loan borrowers, it is going to include every borrower, from Kia owners to luxury car owners. But you just want to know what Kia owners owe and pay for their loans without the luxury car owners’ information in there making those Kias look more expensive than they actually are.


So, let’s take as much of this noise (aka irrelevant data) out of the student loan information as we can, so that you have a better idea of what someone who seeks and completes a bachelor’s degree may specifically need to borrow. One of the challenges to doing this, though, is getting recent loan information about students who completed their bachelor’s degrees.


Why do we want recent information? Because the cost of college has been steadily climbing in the last 30 years, the amount of debt students took out for their bachelor’s degrees even five or 10 years ago will be smaller than the amount that students are taking out now to get bachelor’s degrees.


Unfortunately, the federal government does not collect this kind of data every year, but let’s do the best we can with the information we have.


I accessed two sources of data that the National Center for Educational Statistics makes available. The first source is the Baccalaureate and Beyond (B&B) survey, which  provides information about students who completed a bachelor’s degree in 2007-08, including their student loan debt data. The range of loans went from $1 to $150,000. I calculated the average total student loan amount for those bachelor’s degree recipients—$25,000—which includes federal and private loans.4 I also created the graph below to show the percentage of these bachelor’s degree recipients who graduated with student loans that fell into particular ranges: $1 and $12,000, $12,001 and $25,000, $25,001 and $50,000, $50,001 and $75,000, and $75,001 and $150,000.

 

De-Noising Student Loan Debt Chart_1.png
Source: U.S. Department of Education, National Center for Education Statistics, 2008/12 Baccalaureate and Beyond Longitudinal Study (B&B:08/12). Computation by NCES QuickStats on 12/22/2017.

The green bars show student loans that were less than the average loan amount of $25,000. Yellow, orange, and red bars show loans above $25,000.


The Good News about Student Loans

  • 61.6 percent of bachelor’s degree recipients in 2007-08 owed between $1 and $25,000 (the average for bachelor’s degree recipients in 2008) when they graduated, regardless of the kind of institution from which they got their degree.
  • 69 percent of graduates of public colleges and universities borrowed $25,000 or less.
  • Overall, 7.3 percent of bachelor’s degree recipients borrowed more than $50,000 to pay for their degree.
  • Only 3.5 percent of graduates of public colleges and universities borrowed more than $50,000 to pay for their degree.

The Bad News about Student Loans

  • Only 16.1 percent of 2008 graduates from for-profit institutions borrowed $25,000 or less.
  • 72 percent of 2008 graduates from for-profit institutions had between $25,001 and $75,000 in loans when they graduated. Ouch! That is a huge difference from public institutions--Consider this a red flag, especially if you want to take out as few student loans as possible to get your bachelor’s degree.

The second source of information I accessed was the 2016 Digest of Education Statistics. Buried in that report is a chart that shows the average student loan amounts for students who were in their fourth (or more) year of college in the 1989-90, 1999-2000, or 2011-12 academic years. This chart has a lot of information, but it confirms that as of 2011-12, students at public higher education institutions were borrowing less than the average student loan amount across all institutions. And students at for-profit institutions were also borrowing much more than the average across all institutions.


So, what does this all mean, and how can it help you find a college or university where you can get a bachelor’s degree without taking out sky-high student loans? Here are three takeaways to inform your own research:

  1. It is possible to borrow less than the average student loan amount to get a bachelor’s degree, particularly if you aim to go to a public college or university.
  2. Shop for colleges by loan amount. That means as you are looking at colleges, look beyond the sticker price to go there. Look at the amount of debt people take out to get degrees there. Take advantage of the information about student loans among graduates at different institutions by using Edmit’s college comparison tool.
  3. As you focus on a particular college or university, ask their financial aid office what the average total amount borrowed by their most recent graduating class was, and make sure they are giving you the combined federal, state, and private loan amount. Go further by asking them for information about how many students borrowed less than the average student loan amount in that graduating class. It is a red flag if they cannot or will not give you that information. 

 

Notes:

1.  Since the 1987-88 academic year, the average in-state tuition at a public four-year college has tripled and average tuition at public two-year colleges and private four-year colleges has doubled. Meanwhile, median household income in the U.S. has only gone up 18 percent in the same 30-year timespan.
2.  I was not able to determine if the dollar amounts in this information are 2007 dollars or inflation-adjusted to 2017 dollars, so I am using the dollar amounts straight from those publications.
3. This, and other, federal student loan information is available at the Federal Student Aid Portfolio site. I was unable to determine in that information whether the 2007 information was reported in inflation-adjusted 2017 dollars or 2007 dollars, so I am putting the dollar amounts in as they appear.
4. The Baccalaureate and Beyond (B&B) survey captures information (including student loan amounts) about bachelor’s degree recipients at the time of graduation and then at one-, four-, and 10-year intervals. 2007-08 bachelor’s graduates are the most recent cohort surveyed, and they had a follow-up survey in 2012. I accessed the B&B survey data directly through the NCES Datalab tool. I also utilized an April 2017 NCES publication by Velez and Woo titled The Debt Burden of Bachelor’s Degree Recipients that is based on the 2007-08 and 2012 B&B data.

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