The People's Record

Student debt load deepens - reaches 1 in 5 households

September 28, 2012

One in five American households now owes money on student loans — more than double the percentage of households and nearly triple the average amount of college debt of two decades ago.

That’s causing a ripple effect across the economy, stalling new car purchases and home ownership for young middle-class households that face longer-term debt, paying off their student loans, according to two separate reports released this week.

Since 2007, the number of Americans carrying student debt has increased in nearly every demographic and economic category, as has the size of that debt, a Pew Research Center analysis of newly available government data shows.

Student loan debt in Wisconsin has slashed new-car purchasing and made owning a home less likely for young middle-class households, found a separate survey by the liberal special interest group, Institute for One Wisconsin in Madison.

“The trillion-dollar student loan debt is not just a crisis for students,” said Scot Ross, the Wisconsin organization’s executive director. “It is literally standing between college graduates and their share of the American dream and a more robust economic recovery both nationally and, as shown by our research, in Wisconsin.”

Those in the Wisconsin survey with bachelor’s degrees reported making an average monthly student loan payment of $350, while those with graduate or professional degrees paid an average $448 monthly.

Those without a monthly student loan payment bought new and used vehicles at about the same frequency. But the likelihood of buying a new vehicle, rather than a used vehicle, was influenced by student loan payments. Fifty-two percent of those in the Wisconsin survey who had never had a student loan were likely to buy a new vehicle, rather than a used vehicle, compared with 32.8% who were paying a student loan.

The length of student loan debt was nearly 19 years for persons with bachelor’s degrees and over 22 years for those with graduate or professional degrees in the Wisconsin survey.

Tiffany Koehler, who has a four-year college degree, doesn’t expect to pay off her student debt for 30 years.

She said she’d love to buy a fuel-efficient car to replace the 2000 Ford Explorer passed down from her godfather.

But the 42-year-old Greenfield woman said she is living paycheck to paycheck, working full-time as a director for a non-profit, and paying off a combined $52,000 student loan debt from her bachelor’s degree in political science at Cardinal Stritch University, plus one year of seminary.

Her monthly student loan payments total $475, more than a typical new car payment.

“I have been self-sufficient, never in legal trouble, I walk the straight-and-narrow and cannot even grasp at the American Dream of owning property. My retirement in 30 years looks like a used trailer in the desert of Arizona,” Koehler said. “The American dream is changing for a lot of us.”

The Wisconsin survey also suggested a link between renting and student loan debt, decreasing as income exceeds $150,000. Eighty-five percent of renters with a household income of $50,000 to $75,000 in the survey were currently paying on a student loan.

The survey found an increasing reliance on private student loans vs. government loans, and more young adults consolidating loans, which the institute attributed to the 1996 Student Loan Marketing Association Reorganization Act. That act spun off the formerly government-sponsored Sallie Mae corporation as a private company.