A week after the Consumer Financial Protection Bureau warned about senior citizens’ debt levels, the Pew Research Center issued a report on student debts owed by households on the opposite end of the age spectrum. Titled, “Young Adults, Student Debt, and Economic Well-Being,” Pew used survey data of 1,711 households headed by someone younger than 40 between 2001 and 2010, so the results are a little old.
The study is a little unusual because most investigations on student loan debt focus on individuals and their incomes. For instance, young debtors who live with their older parents would have been excluded from Pew’s survey, and somewhat confusingly Pew characterized the education attainment of the household by the householder’s credentials. This leads to descriptions of households as “not college educated,” which can include college educated non-householders as well as households comprised of people who didn’t complete college. Nevertheless, Pew produced some interesting findings:
(1) Households with student debt had lower net assets than those that didn’t, irrespective of whether the householder completed a college degree or not. The ratio of net worth for non-student debt households to those with student debts was between 7 and 9 to one, depending on the householder’s education level.
(2) Student debt tended to correspond with higher debt levels in other categories, e.g. mortgage debt, auto debt, and credit card debt. On the bright side, household income was higher for households headed by someone who was college educated, $57,900 versus $32,000. Interestingly, Pew’s findings conflict with a study of 25-year-olds and 30-year-olds conducted by the Federal Reserve Bank of New York, which found that non-student debtors were more likely to have mortgage or auto debt than student debtors.
(3) Nevertheless, debt-to-income ratios for student debtor-headed households were much higher than non-student debt households. In the previous decade the ratios doubled for college-educated and student indebted households (205 percent) and non-college-educated households with student loans (100 percent).
(4) The total debt levels of households with student loan debts frequently exceeded the level of their assets, 41 percent of households headed by someone with a college degree and 47 percent when headed by a non-college graduate. By contrast, only 5 to 8 percent of households without student debts had debts exceeding their assets. Pew writes, “[A]sset liquidation will not entirely meet their outstanding debts in the event of job losses and other unforeseen economic shocks.”
Full text of the report can be found here.
Because of the precariousness of student debtors, regardless of the householder’s education attainment, it’s possible that many of these people will be unable to save enough for retirement or worse, suffer a shock and be forced into bankruptcy. The good news is that since many households with student debts have other obligations as well, they can expect to see significant income freed up to pay their student loans after a chapter 7 bankruptcy.
For answers to more questions about bankruptcy, student loans, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.
