Executive Summary
—by Dr. Sandy Baum, Professor of Economics, Skidmore College, Diane Saunders, Vice President Communications & Public Affairs, Nellie Mae Foundation
- While there are pockets of burden among certain borrower groups, the majority of student loan borrowers are still able to successfully repay their student loans without a significant impact on their consumer and social behavior (e.g., buying homes, buying cars, getting married, having children, moving out of their parents' home).
- Seventy-six percent of respondents said that student loans were extremely or very important in allowing them to continue their education after high school. Seventy-six percent said that the investment they made in their education through borrowing was worth it for personal growth (9% disagreed); and 64% said that the investment they made in their education through borrowing was worth it for the career opportunities it provided. Sixty-six percent of borrowers said that while repaying loans is unpleasant, the benefits are worth it.
- Borrowers who report the greatest levels of burden are (1) those who borrowed large amounts but make lower than average salaries, such as art and music students (50% of whom have overall debt higher than current salary); (2) Professional and some graduate students, particularly those who went to law school, whose debt levels are high enough to make even their relatively high starting salaries appear inadequate; (3) some African-American students who disproportionately report that student loan debt changed their career plans or prevented them from attending graduate school.
- Average total debt has increased significantly since the last Nellie Mae study in 1991, but the average has been pulled up by a few borrowers, primarily graduate students, with very high debt. Average debt in 1997 (for a sample consisting of 65% undergraduates and 35% graduate students) is $18,800 (compared to $8,200 in 1991). Median total debt (half higher, half lower) is $13,000.
- Average undergraduate student loan indebtedness is $11,400. Borrowers who last attended public four-year institutions had an average of $10,900 in undergraduate student loan debt; those at private four-year institutions had an average of $15,300; public two-year students had an average of $5,900; and vocational/technical students had average indebtedness of $6,200.
- Average indebtedness of graduate students overall (including undergraduate debt) is $31,700 (with about one-third of this representing undergraduate debt). Broken down, borrowers who last attended graduate school had an average of $24,500 in debt, while professional school students (e.g., law and medical) had an average of $48,500 in student loan debt.
- Average percentage of borrowers' monthly income which goes towards student loan payment is 12% (median is 8%).
- About 40% of students who did graduate work in medicine, law or business have student loan debt levels exceeding their current salaries. Twenty-five percent of undergraduates who attended four-year private institutions, compared to 21% of those who attended four-year public institutions, have student loan debt greater than their current incomes.
- Some borrowers reported that they had delayed certain activities because of their student loan payments, and these percentages have increased since 1991. In 1997, 40% of borrowers said that their debt had caused them to delay buying a home, up from 25% in 1991; 31% said that they had delayed purchasing a car due to their student loan indebtedness, compared to 16% in 1991; 22% said that their student loans had caused them to delay having children, up from 12% in 1991. Car ownership does, in fact, appear to be slightly affected by debt levels. But this is not the case for home ownership, which is determined by income, age, living with a spouse or partner, and the presence of children. Similarly, debt levels have no measurable impact on whether or not borrowers are married or have children.
- Only 17% of respondents "strongly agreed" or "agreed" that they had significantly changed their career plans because of their student loan debt. Students who attended certain types of schools did report a higher incidence of changing careers because of debt; 21% of vocational/technical students and 21% of professional school students (medical, law, business) "strongly agreed" or "agreed" that they had significantly changed their career plans due to debt. Twenty-six percent of black borrowers "strongly agreed" or "agreed" that they had significantly changed career plans, compared to 16% for whites and 19% for Hispanics.
- Non-white students who did not complete a degree were significantly more likely than white students to say that loans had prevented them from staying in school. About 70% of black, Hispanic and Asian/Pacific Islander borrowers gave this response compared to 43% of whites. However, there is no significant correlation between debt levels and responses to the question about importance of loans in preventing students from staying in school.
- Lower income students (those who had received Pell grants) were more likely than other undergraduate respondents to have debt exceeding $20,000 (16% of Pell recipients were at this level compared to 12% of other undergraduates). Half of the Pell recipients in the study said that their undergraduate debt had prevented them from attending graduate school, compared to 40% of the overall undergraduate population. However, Pell Grant recipients do not report feeling significantly more burdened than other borrowers by student loan repayment.
- Over one quarter (26%) of survey respondents said that they had used credit cards to help pay for tuition.
- Respondents have higher non-education loan debt than student loan debt, and feel equally burdened by both forms of debt. Ninety-seven percent of respondents had non-education loan debt, with an average monthly payment of $1,000 (median =$700).
Nellie Mae is a major national provider of education loan funds; Nellie Mae Foundation is a major philanthropic contributor to educational programs serving low-income, disadvantaged youth.
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