Most college students owe far less than what you’ve heard

Most college students owe far less than what you’ve heard

In a labor market that tends to reward more credentials with higher salaries, students were quick to take advantage of the new ways to finance a graduate degree. And for many, the investment paid off. Borrowers with student loans of $50,000 or more (a proxy for graduate borrowers) earned about twice as much as those with smaller loans in 2014 and had far lower default rates.

But cracks are starting to show. A growing number of graduate borrowers are going to for-profit schools, which typically don’t lead to good jobs-17 percent attended for-profits in 2014, vs. just 1 percent in 1990. An even larger number are opting for income-driven repayment plans to keep initial payments low, though interest keeps building. The upshot: For the first time starting a few years ago, large-balance borrowers collectively owe more than they did when they first graduated, even though they’ve been making loan payments for a few years.

“A lot more of these big borrowers are struggling,” Looney says. “I’m not so concerned about the doctors and lawyers and MBAs, who’ll be okay in the end. Continue reading