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Outstanding student debt crossed the $1.5 trillion mark earlier this year, which leads many observers to believe that new college graduates are struggling under ever-increasing levels of debt. But at least part of that perception is inaccurate. Between 2012 and 2016, the typical debt burden for a new college graduate barely increased at all.
The median borrower who graduated college with a bachelor’s degree in 2012 had around $28,900 in debt (in today’s dollars). Fast-forward to 2016, and that number has barely budged. Students who graduated college in the year of the Rio Olympics owed $28,923, a statistically meaningless increase.
Yes, you read that correctly. Median student debt for new college graduates between 2012 and 2016 was essentially flat.
The picture looks slightly worse if we only consider federal student loans (ignoring those from state or private sources). Between 2012 and 2016, median federal student loan debt at graduation edged up from $26,759 to $27,720—an increase of less than $1,000. No matter how you slice the data, though, undergraduate student debt has not become substantially more burdensome since 2012.
One explanation may be that federal borrowing limits for undergraduates have been constant since the 2008-09 academic year. Research has found that higher federal loan limits induce colleges to raise tuition, which leads in turn to more borrowing. Absent increases in loan limits, borrowing has remained mostly flat.
Another explanation is demand. During the recession, colleges saw big enrollment boosts at the undergraduate level as people took refuge from a rocky job market. But as the economy improves, production of bachelor’s degrees has slowed. Faced with a flight of students, some colleges may endeavor to keep a lid on tuition hikes.
Whatever the cause, the slowdown in undergraduate debt accumulation should come as a welcome relief. It should also put a damper on costly proposals, such as loan forgiveness and free college, which are aimed at ameliorating said debt levels.
So if undergraduate student debt has barely budged, why does aggregate student debt keep barreling upwards? More students pursuing education is part of it. But the blame also lies with graduate programs.
Even as Congress has kept firm caps on loans to undergraduates, it has removed all limits on graduate students’ borrowing. Graduate students can now borrow unlimited amounts from the federal government. Not coincidentally, over the last four years the most expensive graduate degrees have only gotten more expensive.
In 2012, the median doctoral student graduated with $74,018 in debt. By 2016, that had increased more than 40%, to $105,871. For students getting first-professional degrees (including law and medical degrees), median debt at completion increased from $156,007 to $176,566, a 13% change.
Generous loan repayment plans mean much of these outstanding balances will end up being forgiven, courtesy of taxpayers. That’s a misallocation of public resources, given that graduate students are a minority of borrowers and most of them are well-off anyways.
If there is a student loan crisis, new college graduates are not the epicenter. With median debt for bachelor’s degree recipients mostly flat, these borrowers should create little cause for concern and even less for drastic action. While $1.5 trillion is a scary number, other statistics paint a brighter picture.
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