student loans

A recent study published in the Journal of Higher Education reveals that a college graduate’s mix of funding sources may reflect when they were born and how likely they were to obtain a graduate degree. A look at three cohorts of college graduates, those born in 1953-1962, 1963-1972, and 1973-1982 showed that the proportion of students who utilized one or two sources to fund their education decreased, while those who used three or more increased. Additionally, those in the most recent cohort who used more sources were found to be less likely to obtain a graduate degree compared to those who were fully funded by their families.

Nearly 1 in 6 adults carrying outstanding student loan debt (1 in 3 among 18 to 29 year olds), with both the number of borrowers and the debt amount increasing in recent decades. Meanwhile, the share of new entrepreneurs aged 20 to 34 declined from 34 percent to 27 between 1996 and 2019, and a new issue brief from the Ewing Marion Kauffman Foundation notes that among individuals who start businesses, higher levels of student loan debt are negatively related to business income and employment. Noting that the debt can directly affect an individual’s overall personal financial resources, and indirectly affect ability to start a business, the brief extends some considerations for decision makers who seek to respond to those challenges.

A recent brief shows the troubled relationship between student loan debt and entrepreneurship. The report, Student Loans and Entrepreneurship: An Overview from the Ewing Marion Kauffman Foundation, found that of those student borrowers who currently own or plan to own a business, nearly half reported that their student loans affected their ability to start a business. Additionally, among those who did start businesses, higher levels of student loan debt were negatively related to business income and employment.

Earning a college degree has long been touted as a prerequisite for getting a good job with the wages needed to support a middle class lifestyle, or better. However, as tuition rates have continued to rise across the country, so too has the burden of student loan debt.

Outstanding student loan debt increased by $20 billion from the second quarter of 2019 to a total of $1.5 trillion in the third quarter, according to the New York Federal Reserve Bank’s most recent quarterly report on household credit and debt. This amount — second only to mortgages at $9.4 trillion — accounted for nearly 11 percent of total household debt in 2019, increasing from roughly 4 percent in 2005. The most pronounced rise (37.8 percent) comes from people aged 18 to 29 — the age group for most college students — swelling from approximately 15 percent in 2005.  Not only has the total value of student loan debt increased, but so has its delinquency rates.