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Debt Worriers

Student debt spans the population and affects all groups across age, race, ethnicity and gender.

Elizabeth Hoyt

May 10, 2016

Debt Worriers
At this point, it’s old news that student loan rates have doubled. It’s also nothing new to hear that student debt is higher than ever, surpassing $1 trillion. Student loan debt inflicts one out of five Americans over the age of 20; two out of three college seniors (2011). The average amount is over $28,000 – not a small amount by any standard. If you’re worried about the student debt you’re going to have, currently have or are currently accumulating, you are not alone.

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Student debt spans the population and affects all groups across age, race, ethnicity and gender. Recent graduates being faced with larger-than-life debt bills are, according to economists, being forced to delay major spending decisions, such as saving for retirement and buying a home, and their household formation. Plainly stated, people are putting off the usual rites of passage into the next stages of adulthood as a result of their debt burdens.

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The recession is, of course, a factor in the equation. Recent graduates are searching for work in weak labor markets and older loan recipients find repaying difficult with the decline of other assets and earnings potential. The cycle of debt also may be a factor that lowers overall financial accumulation for those with student debt, causing them to start behind and continue to lose money to their debts. The delinquency rate alone, roughly 11 percent, demonstrates that many are struggling to repay their student loan debts.

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It’s clear there’s a student debt issue, but it’s unclear how it’s affecting people. That is, it was unclear. A study from the Urban Institute offers perspective on those that worry most about their student debt.
Some of the study’s findings were common sense, like those with lower income tend to worry more than those with high incomes. Other findings, however, were a little more insightful to the worries of debt. Here are some of the key findings, as derived from the study: • More than half (57 percent) of people with student loans are worried they may be unable to repay their debts and the concern spans both economic and demographic groups.
• The percentage of people worrying about student debt more than doubles (86 percent) for those with household incomes less than $25,000.
• People who have obtained college degrees are less likely to worry about repayment, likely due to earning potential.
• Although women are not any more likely to have student debt than men, they are still more concerned about paying back their debt – around 8 percent.
• African Americans (34 percent) and Hispanics (28 percent) are twice as likely to have student debt than whites (16 percent), which is not surprising since white families, on average, have six times of wealth of African American and Hispanic families.
• People with financially dependent children worry more than those without.
• Even though younger workers are more likely to have student debt than older workers, the worry of paying it back is fairly even across all age segments.
• People with graduate degrees have an increased repayment stress, likely as a result of having loans from both college and graduate school.
• People who reside in the Northeast are especially concerned about student debt, likely because states within that region have a higher average of student debt per borrower.
• People without full-time jobs are more concerned about debt, even after household income is taken into account.
• Race, ethnicity and household structure are not significantly related to the level of concern regarding debt repayment (after controlling for personal and household characteristics). It’s not all doom and gloom: those who earn degrees do reap the benefits while in the workplace. In fact, college graduates actually earn up to 84 percent more than those with a high school diploma. It’s clearly an investment that pays off. Many college graduates are able to manage debts, given their higher income earnings, thanks to that college degree.

What does this reveal about the worries students have regarding debt?

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