Graduates Who Borrow Make Less, More Likely To Move Back In With Parents

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"Graduates Who Borrow Make Less, More Likely To Move Back In With Parents"

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Those who never borrowed money to pay for their college tuition make higher average annual salaries than those who took out loans, according to a new report from the Department of Education. Meanwhile, those with more debt after graduation were more likely to move back in with their parents in 2009 than those with less debt.

In 2009, those who never borrowed, had attained a bachelor’s degree, and were employed made an average salary of $36,200, higher than for borrowers at any debt level.

Student loan report

Meanwhile, in past years higher debt levels didn’t have much bearing on whether a graduate was more likely to move back in with his or her parents. But that changed in 2009. That year, those who borrowed at the three highest levels “moved in with parents or in-laws at a higher rate than those who borrowed little or not at all,” the report notes.

Student loan report 2

More and more students are likely to be affected by these trends, as the report makes it clear that student debt burdens are growing. The percentage of recent graduates who had borrowed grew steadily from 1992 to 2007, from 49 percent to 66 percent. The cumulative amount also grew, from $15,000 in the former to $24,700 in the latter.

And the burden is getting heavier. The ratio of total federal loans to annual income increased from 49 percent in 1994 to 62 percent in 2009. “In other words, bachelor’s degree recipients’ cumulative federal debt in 2009 totaled 62 percent of their annual income 1 year after graduation,” the report explains. And while experts say that owing more than 12 percent of monthly income to student loan payments constitutes a burden, the percentage of graduates facing that situation grew from around 20 percent in 1994 and 2001 to 31 percent in 2009.

Past reports have found that high student debt burdens will mean a big loss of future earnings, with today’s more than $1 trillion in total debt meaning $4 trillion in wages lost down the road. That’s bad for the economy, and student debt burdens impact the economy in other ways: Young people with debt have seen their homeownership rates crater, in large part because they struggle to qualify for mortgages, and the money that will be spent paying back loans could instead buy 155,000 new homes.

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