Average Student Debt Reaches All-Time High

Average Student Debt Reaches All-Time High
Danielle Kurtzleben

Americans are increasingly borrowing for diplomas that are worth less and less

As recent college graduates leave behind the term papers, dorms, and red Solo cups, they are discovering sobering truths about the cost of their education.

A new report from the Project on Student Debt shows that average debt for college seniors graduating in 2010 was $25,250, the highest on record, and up 5.2 percent from the 2009 figure of $24,000. In recent years, that average debt figure has grown steadily and has generally outpaced inflation, even as earnings for bachelor's-degree holders have stagnated.

Census data shows that the gap between debt levels and earnings continues to narrow. Looking at the last five years, debt has grown steadily, while the median income for people who have achieved bachelor's degrees has, on the whole, shrunk. Adjusted for inflation, average debt for graduating college seniors has risen by approximately 11 percent over the last five years, while the median earnings for bachelor's degree-holders 25 and older have fallen by 3 percent.

That median earnings figure, of course, does not reflect how much a recent graduate earns, as it takes into account all people 25 years and older; those who have spent longer in the workforce are likely to make much more money than those who are less experienced. However, the data suggests that a bachelor's degree is worth less than it used to be, while the cost for such a degree continues to rise.

Additionally, in the current labor market, even earning money is a challenge. Young Americans are having a particularly difficult time finding work. The unemployment rate for young college graduates was 9.1 percent in 2010, up from 8.7 percent in 2009.

The increase in student debt is nothing new, says Lauren Asher, president of the Institute for College Access & Success. "Overall, college costs have outpaced both family incomes and available grant aid for some time," she says. Increased debt results from a combination of factors, she says, including rising college costs, lower incomes, and also cash-strapped state budgets, resulting in less aid to students in some states.

Of course, receiving a bachelor's degree still provides substantial advantages over the alternative; according to the Project on Student Debt, the unemployment rate for 20- to 24-year-olds with only a high school education was 20.4 percent in 2010, more than double the rate for young college graduates. Likewise, the median income for those with only a high-school diploma or its equivalent in 2010 was $26,349, more than 40 percent less than the median income for college grads.

The table below shows how the costs and benefits of a diploma have changed in recent years for college graduates. Though the average debt figures are rounded estimates, adjustment for inflation suggests that real debt for 2010 graduates is substantially higher than in the prior four years.

Year	Average Debt	Average Debt (2010 $)	Median Earnings	Median Earnings (2010 $)	Debt:Earnings (inflation-adjusted)
Sources: Project on Student Debt, U.S. Census American Community Surveys (1-year estimates, 2006-2010), Bureau of Labor Statistics CPI Inflation Calculator
2006	$21,100	$22,822	$45,221	$48,912	0.47
2007	21,900	23,032	46,805	49,224	0.47
2008	23,200	23,497	47,094	47,696	0.49
2009	24,000	24,394	47,510	48,289	0.51
2010	25,250	25,250	47,422	47,422	0.53

President Obama recently announced plans to change student loan repayment rules in the United States, altering the existing income-based repayment program and allowing some low-earning new graduates to make even lower monthly payments, and allowing many more to consolidate their loans with lower interest rates. The plan could provide much-needed relief to heavily burdened graduates in an uncertain job market.

However, the longer-term problems of high joblessness, stagnant earnings, and ballooning debt will take much longer to solve.