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Clare Boothe Luce Center for Conservative Women - Student Loan Debt High But Not in Crisis Student Loan Debt High But Not in Crisis - Clare Boothe Luce Center for Conservative Women

Student Loan Debt High But Not in Crisis

Student Loan Debt High But Not in Crisis


Student loan default rates have nearly doubled in the past decade, creating the perception of a student debt crisis. But that perception is wrong according to researcher Max Eden at the Manhattan Institute.

Most graduates who borrowed to attend a four-year university face no debt crisis. It is students who attended, but often did not complete, lower-quality for-profit and two-year public institutions who are facing financial hardship.

Key findings of Eden’s research are:

Even as overall student debt has been rising, the monthly burden on most borrowers has not increased.

  • 50% of borrowers have monthly payments of $203 or lower, and another 25% have payments between $203 and $400.
  • Since those with at least some college enjoy an average monthly earnings premium over high school grads of $750, the financial return on college investment more than doubles the monthly cost. Moreover, the mean payment-to-income ratio has fallen from 15 percent to 7 percent.

Those struggling with student debt are overwhelmingly “nontraditional borrowers” who took out loans to attend, but often did not graduate from, two-year and for-profit institutions.

  • 70% of the students who left school and started to repay federal loans in 2011 — and then fell into default by 2013 — were non-traditional borrowers. An additional 12% of defaulters attended non-selective four-year universities.
  • The number of nontraditional students swelled after 2008 to represent almost half of all new borrowers.
  • The majority of students whose loans end up in default leave school with less than $10,000 in debt.


Eden argues that current proposals to fix the perceived student loan crisis are misguided. A free-college proposal, for example, would not cover non-tuition fees (which are often larger than tuition fees), and that would negatively affect students from low-income families far more than those from higher income families.

The better solution, he suggests, is to require colleges — public and private, non-profit and profit — to have skin in the game of student debt.

Real higher-education reform wouldn’t regulate and reward by tax status; it would realign the incentives of all schools to better serve students. College … should have skin in the game on loan repayment; if students can’t pay back their loans, the school should be on the hook for a portion of the unpaid balance. Even a small amount of risk would give postsecondary institutions a reason to contain their costs and offer a better education.


Source: Is There a Student Debt Crisis? Max Eden, Manhattan Institute


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