Category Archives: Student Debt

Student Loan Debt in Bankruptcy: An Empirical Assessment

Source: Daniel A. Austin, Northeastern University School of Law Research Paper No. 188-2014, May 27, 2014

From the abstract:
Education loan debt in the U.S. recently reached $1.2 trillion. Thirty-nine million Americans — nearly 20% of U.S. households — owe student loans, and student loans are by far the fastest growing component of non-housing consumer debt. For example, in fourth quarter 2013, U.S. households incurred $82 billion in debt (exclusive of housing debt), a 3.3% increase from the previous quarter. Of this amount, $53 billion (65%) was student loan debt. In contrast, auto loans and credit card debt accounted for only $29 billion.

Student loan debt is also a rapidly increasing element in consumer bankruptcy. This study examines the growth of student loan debt in consumer bankruptcy cases filed each year from 2005 to 2013. In this study I obtain data from 500 randomly-selected cases per year to calculate values such as annual percentage of filers with student loan debt, average annual amount of student loan debt, and student loan debt as a percentage of debtor income and percentage of total unsecured debt. Among the findings of this study, the percentage of debtors with student loan debt increased from 15.7% in 2005 to 22.3% in 2013, while the average student loan debt load for such debtors more than doubled from $15,350 to $32,096 during the same period. As these and other numbers reported in this study show, student loan debt is a rapidly increasing component of consumer bankruptcy.

Young Adults, Student Debt and Economic Well-Being

Source: Richard Fry, Pew Research Center, May 14, 2014

From the summary:
Student debt burdens are weighing on the economic fortunes of younger Americans, as households headed by young adults owing student debt lag far behind their peers in terms of wealth accumulation, according to a new Pew Research Center analysis of government data. About four-in-ten U.S. households (37%) headed by an adult younger than 40 currently have some student debt—the highest share on record, with the median outstanding student debt load standing at about $13,ooo.

An analysis of the most recent Survey of Consumer Finances finds that households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700). And the wealth gap is also large for households headed by young adults without a bachelor’s degree: Those with no student debt have accumulated roughly nine times as much wealth as debtor households ($10,900 vs. $1,200). This is true despite the fact that debtors and non-debtors have nearly identical household incomes in each group.

While these stark differences in wealth accumulation are accounted for in part by outstanding student debt, that’s only part of the story. Since the typical young student debtor household has about $13,000 in outstanding student loan obligations and the overall wealth gap is much larger, clearly other factors are also at work. Specifically, student debtor households are accumulating less wealth, in part, because they tend to owe relatively large amounts of other debt as well, from car loans to credit card debt. Among the young and college educated, the typical total indebtedness (including mortgage debt, vehicle debt and credit cards, as well as student debt) of student debtor households ($137,010) is almost twice the overall debt load of similar households with no student debt ($73,250). Among less-educated households, the total debt load of student debtors ($28,300) is more than ten times that of similar households not owing student debt ($2,500)….

The Case for Debt Resistance

Source: Ann Larson, New Labor Forum, Vol. 23 no. 2, May 2014
(subscription required)

….The idea that a degree leads to a decent life, however, is false, and not just for the young. Currently, more than 60 percent of student debtors are over thirty years old, and many retirees have reported having their social security checks garnished by student loan creditors. The struggle against such illegitimate debt and for a robust funding of public goods is a part of the movement against privatization, which is itself part of the global anti-austerity movement against neoliberal structural adjustment programs being deployed across the world, from Detroit to Athens. In that context, an analysis of debt can provide precisely the deeper understanding of capitalism that some critics are asking for. ….

Borrowing Against the Future – The Hidden Costs of Financing U.S. Higher Education

Source: Charlie Eaton, Cyrus Dioun, Daniela García Santibáñez Godoy, Adam Goldstein, Jacob Habinek and Robert Osley-Thomas, Debt & Society, 2014

…In recent years, students’ families and colleges have increasingly sought capital from three main financial markets. Public colleges faced declining state appropriations, and the average cost of tuition, room, and board increased much faster than grant aid for needy students. This pushed families to borrow increasing amounts from student loan markets to pay for college costs. Private and public colleges increased institutional borrowing, particularly from municipal bond markets for capital projects. And the rapid growth of for-profit colleges was fueled by equity investors that provided them with capital. All of this financing comes at great cost, in the form of either interest payments or profits earned to satisfy equity investors.

In this report, we estimate – for the first time – the total cost to the American higher education system of reliance on capital from each of these markets. The report covers the years for 2002 to 2012 – the only years for which adequate data are available. For student loans, we estimate the total interest paid annually on all outstanding student loans — both private and federal. For institutional borrowing, we describe total interest payments on college and university debts — the largest share of which went to funding amenities. In the case of for-profit colleges with capital from equity markets, we estimate the costs to students and taxpayers of profits made by these institutions —and the vast share of revenue they brought in from federal student aid programs — to satisfy stock shareholders and private equity investors. Except where noted, our estimates cover all colleges that received federal Higher Education Act Title IV funds and granted two-year, four-year, or graduate degrees between 2002 and 2012….

Measuring Student Debt and Its Performance

Source: Donghoon Lee, Wilbert van der Klaauw, Andrew Haughwout, Meta Brown, and Joelle Scally, Federal Reserve Bank of New York, Staff Report Number 668, April 2014

From the summary:
Studies continue to indicate that higher education is frequently a worthwhile investment for individuals and that it raises the productivity of the workforce as a whole. While the rising cost of post-secondary education has not eliminated this “college premium,” it has raised new questions about how growing numbers of students can make these investments. One solution to this problem is student loans, which have come to play an increasingly important role in financing higher education. Yet, despite its importance, educational debt is not well understood. Among the reasons is that there exist few central repositories of information on the characteristics and performance of all student loans, which currently include loans made by both government and private lenders. In this paper, we bring a new data set to bear on this important issue and present a brief analysis of the historical and current levels of student debt and how those loans are performing. We also briefly discuss the implications of student loans for borrowers and the economy.

The One Percent at State U – How Public University Presidents Profit from Rising Student Debt and Low-Wage Faculty Labor

Source: Andrew Erwin and Marjorie Wood, Institute For Policy Studies, May 18, 2014

From the summary:
New report finds that student debt and low-wage faculty labor are rising faster at state universities with the highest-paid presidents.

State universities have come under increasing criticism for excessive executive pay, soaring student debt, and low-wage faculty labor. In the public debate, these issues are often treated separately. Our study examines what happened to student debt and faculty labor at the 25 public universities with the highest executive pay (hereafter “the top 25”) from fall 2005 to summer 2012 (FY 2006 – FY 2012). Our findings suggest these issues are closely related and should be addressed together in the future.

Since the 2008 financial crisis, executive pay at “the top 25” has risen dramatically to far exceed pre-crisis levels. Over the same period, low-wage faculty labor and student debt at these institutions rose faster than national averages. In short, a top-heavy, “1% recovery” occurred at major state universities across the country, largely at the expense of students and faculty.

• The student debt crisis is worse at state schools with the highest-paid presidents. The sharpest rise in student debt at the top 25 occurred when executive compensation soared the highest.
• As students went deeper in debt, administrative spending outstripped scholarship spending by more than 2 to 1 at state schools with the highest-paid presidents.
• As presidents’ pay at the top 25 skyrocketed after 2008, part-time adjunct faculty increased more than twice as fast as the national average at all universities.
• At state schools with the highest-paid presidents, permanent faculty declined dramatically as a percentage of all faculty. By fall 2012, part-time and contingent faculty at the top 25 outnumbered permanent faculty for the first time.
• Average executive pay at the top 25 rose to nearly $1 million by 2012 – increasing more than twice as fast as the national average at public research universities.

The Great Cost Shift Continues: State Higher Education Funding After the Recession

Source: Robert Hiltonsmith, Tamara Draut, Dēmos, March 2014

From the summary:
As student debt continues to climb, it’s important to understand how our once debt-free system of public universities and colleges has been transformed into a system in which most students borrow, and at increasingly higher amounts. In less than a generation, our nation’s higher education system has become a debt-for-diploma system—more than seven out of 10 college seniors now borrow to pay for college and graduate with an average debt of $29,400. Up until about two decades ago, state funding ensured college tuition remained within reach for most middle-class families, and financial aid provided extra support to ensure lower-income students could afford the costs of college.

As Demos chronicled in its first report in the The Great Cost Shift series, this compact began to unravel as states disinvested in higher education during economic downturns but were unable, or unwilling, to restore funding levels during times of economic expansion. Today, as a result, public colleges and universities rely on tuition to fund an ever-increasing share of their operating expenses. And students and their families rely more and more on debt to meet those rising tuition costs. Nationally, revenue from tuition paid for 44 percent of all operating expenses of public colleges and universities in 2012, the highest share ever. A quarter century ago, the share was just 20 percent. This shift—from a collective funding of higher education to one borne increasingly by individuals—has come at the very same time that low- and middle-income households experienced stagnant or declining household income. …

How The Government Could Make Public College Free For All Students

Source: Bryce Covert, ThinkProgress, January 12, 2014

Tuition at public colleges came to $62.6 billion in 2012, according to the latest government data. That’s less than what the government already spends to subsidize the cost of college through grants, tax breaks, and work-study funds, which comes to about $69 billion. It spends another $107.4 billion on student loans.

That means that with the money it already spends to make college affordable, the government could instead subsidize public college tuition, thereby making it free for all students. This would not just mean anyone could attend a higher education institution without worrying about cost, but it could incentivize private ones to reduce their costs in order to compete with the free option.

It would also address the government’s current patchwork attempts to make college affordable, which isn’t working for many low- and middle-income families. Tax-based aid is mostly delivered to wealthy families, not the ones in need. Pell Grants, on the other hand, were cut in 2012, which meant students got less aid or kicked out altogether, after already covering the smallest percentage of college costs since the program was created. (House Republicans have had the program in their sights for even more cuts.)…

Adjunct Connections

Source: Colleen Flaherty, Inside Higher Ed, November 18, 2013

Linking their struggle for better working conditions to student debt struggles was among the organizing strategies adjuncts discussed during a weekend conference here on non-tenure-track faculty organizing. Speakers and attendees said they anticipated difficulties, but many also expressed confidence that powerful bonds could be forged over the idea that rising tuition rates aren’t supporting a living wage for those doing much of the teaching. …
The Union-Agnostic Adjunct Agenda
Source: Colleen Flaherty, Inside Higher Ed, January 30, 2013

Attempts to organize adjunct professors – a professionally diverse group of people who often can’t identify their counterparts on campus due to a kind of commuter professor status – take real effort. That’s especially true in the country’s growing number of right-to-work states, and truer still in those that ban collective bargaining for public employees. But adjunct and union advocates say that organization is possible, even in some of the country’s least union-friendly places.

Postsecondary Education Issues in the 113th Congress

Source: David P. Smole, Congressional Research Service (CRS), CRS Report for Congress, R43302, November 7, 2013

The 113th Congress may face an array of policy issues affecting postsecondary education. Many of these postsecondary education issues may be considered as part of efforts to reauthorize the Higher Education Act of 1965, as amended (HEA). However, postsecondary education issues also may emerge as part of other legislative efforts such as comprehensive immigration reform (CIR), reform of the federal tax code, or the annual appropriations process.

This report identifies and briefly examines several postsecondary education policy issue areas that may be of general interest. For each of these broader issue areas, the report provides a brief background summary and an introduction to and discussion of various aspects of the issue. Varied policy options are also identified for further consideration. The following postsecondary education issue areas are examined in this report:
College costs and prices. …
The Federal Pell Grant program. …
Federal student loans. …
Student loans and personal bankruptcy. …
Noncitizens and federal student aid. …
Institutional quality. …
College completion. …
Campus safety. …