Figure 1 shows average total indebtedness of students who graduated with a bachelor’s degree from a public four-year institution. In 1999-2000, bachelor’s degree recipients had $11,100 on average in student loan debt. However, not all students take out loans and, in 1999-2000, 54% of bachelor’s graduates had debt. Of those with debt, the average borrower left school with $20,500 in student loans. By 2010-11, there was an increase in the average indebtedness of bachelor’s degree recipients such that the average debt level was $13,600. There also was an increase in the percentage of students who borrowed, which increased to 57%. Among bachelor’s degree recipients who borrowed, average indebtedness was $23,800 in 2010-11 – an increase of $3,300 of average debt since 1999-2000.
Figure 1: Average Total Debt Levels of Bachelor’s Degree Recipients, Public Four-Year Colleges and Universities, in 2011 Dollars, 1999-2000 to 2010-11
Source: The College Board, Trends in Student Aid 2012, Figure 12A
Figure 2: Average Debt of Those with Loans, by State, Class of 2011
Source: Project on Student Debt (2012). NR = Not Reported.
Figure 3: Percentage of Graduates with Debt, by State, Class of 2011
Source: Project on Student Debt (2012). NR = Not Reported.
These trends towards increasing both the number of borrowers and levels of indebtedness have made student debt an issue of public concern that both federal and state policy will need to address. The shift to the direct lending system has made it possible for all students to now opt-in to alternative repayment plans that can help to ensure manageable student loan debt levels for borrowers. However, more policy work needs to be done. For instance, eliminating the need to opt-in to alternative repayment options and making a repayment plan like the income contingent option the default option for all borrowers would help ensure that borrowers are able to manage their debt loads and are better able to avoid defaulting on their loans. In addition, the higher debt levels and larger student loan default rates of students who attend for-profit institutions needs to be addressed as a public policy issue (see for instance #10 on the American Association of State Colleges and Universities’ Top 10 Higher Education State Policy Issues for 2013). Likewise, a new bill [H.R. 6674] introduced by Tom Petri (WI-R) in the U.S. House would enable the Internal Revenue Service to directly collect student loan payments. This idea has the potential to streamline the debt collection process, to lower the costs of loan servicing, and to provide borrowers with a reasonable way of avoiding student loan default. Allowing a tax collection agency to manage student debt repayment has been in operation in other countries for years. For instance, Australia has always used The Australian Taxation Office to collect debts from the Higher Education Contribution Scheme. A similar debt collection process deserves careful consideration in the United States. In addition, student loan debt does not impact all students equally and can constitute a special hardship for certain groups of students, such as those who drop out before completing their degrees. These special populations need particular attention in policy changes regarding student loans. Finally, the issue of student loans in bankruptcy needs to be addressed. Student loans are one of the few types of debt that are not dischargeable in bankruptcy and more consumer protections are needed. Overall, the need for thoughtful policy is pressing because the increased reliance on student loans coupled with the increase in student loan levels is already restricting educational access and limiting opportunity to learn for countless individuals.
By: Jennifer A. Delaney
