The Truth About Student Debt

IT’S BAD. But that’s no reason not to borrow. Here’s why.

- Diane Harris

THE FACTS SEEM STARK: ABOUT 45 MILLION AMERICANS now owe a stunning $1.6 trillion in student debt. That’s roughly one in every four adults, nearly double the number who had higher education loans 15 years ago. Among millennials, the number is one in three, often cited as a reason why so many young adults can’t afford to buy a home, get married, have a family or move out of their parents’ basements.

Meanwhile, the average amount that undergraduates borrow has shot up 60 percent over the same period, and defaults on loans have jumped as well. More than one-quarter of students can’t keep up with their payments 12 years after borrowing, vs. 18 percent just a few years ago, and that number is projected to hit 40 percent by 2023. With default can come heartache: It can ruin people’s credit scores, wreck their ability to borrow or rent an apartment and, in some areas, cause their professional licenses to be revoked.

Given all that, it’s not exactly shocking that a lot of people are using the word “crisis” to describe student debt these days. Or that college loans and the pain they can cause have become a hot topic in the 2020 presidential campaign. Nearly every candidate is turning up the hyperbole and offering a proposal for debt relief, from the modest (hello, Kamala Harris, Beto O’Rourke) to the sweeping (nice to see you, Bernie Sanders, Elizabeth Warren).

But while there’s definitely no denying that some people with student debt are having serious problems, the notion that the entire system is completely broken is just plain wrong, many experts say. Moreover, the prevalence of this total-disaster narrative obscures some key facts about borrowing— like for instance, that $100,000-plus balances are actually rare and that it is the students with the smallest amount of debt who tend to be the ones who struggle the most.