37% Of Young Households Now Have Student Debt

Young people who get a college education are normally an asset to their families and their country. That education helps to increase the family's income and standard of living -- and it helps the country by providing an educated workforce (and a workforce that pays more in taxes than they would without an education). It benefits a country to help young people get that education for those reasons, but unfortunately we are not doing it right in this country.

Note in the top chart that the percentage of young households (headed by someone under 40 years old) with a debt incurred from going to college has ballooned since 2001. In just the last 13 years, the percentage with student debt has grown from 22% to 37% (from slightly more than 2 out of 10 households to nearly four out of 10 households). And this debt (the amount of which has also grown) is not only holding these families back from accomplishing their financial goals, it is also delaying the increase in taxes they should be paying (because too much of their income must go to pay back the huge loans they had to take out to finish college).

There are two main reasons for this growing percentage of young people with student debt -- rising tuition & other college costs, and a stagnant national median wage. While college costs are rapidly growing (along with other living costs), wages are not growing. That is causing the middle class to shrink, and many parents who could have paid for their kid's college can no longer do so. Those middle class kids now join working class kids in having to borrow money (many times a lot of money) to get their college degree. Then they must spend many years trying to pay back that crushing debt.

Once again making employers share some of the rising productivity with their workers would help this situation for the future, but for now we need to lower (or eliminate) the interest rate of those college loans already burdening young households. That might not sound like good economics, but it actually is -- since the quicker those loans are paid back, the sooner those young people will be able to establish themselves and start earning more (and paying more in taxes). The truth is that helping these young people to reduce their debt (and others to graduate with less debt) would be cost-effective.

Trying to make interest money off of student loans is a silly and short-sighted economic policy. We should be offering free tuition to those who qualify for college -- not discouraging them from going to college because of high college costs and high interest rates on student loans. Education should be treated as a public good -- not a profit-making business (which it will never truly be).

Here are some other interesting charts (all charts are from information provided by the Pew Research Center) showing the problems created by the huge student debt problem.