NCPA - National Center for Policy Analysis

College Debt Hits Well-Off

August 13, 2012

Rising college costs and a sagging economy are taking the biggest toll on a surprising group: upper-middle-income families, says the Wall Street Journal.

  • According to recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010, the latest figures available.
  • That group also saw a sharp climb in the amount of debt owed on average.

The surge is leading many such families to look closer at cost and value when choosing colleges. If the new frugality continues, experts say, it could make it difficult for all but the most selective schools to keep pushing through large tuition increases.

  • The Journal's analysis defined upper-middle-income households as those with annual incomes between the 80th and 95th percentiles of all households nationwide.
  • Among this group, 25.6 percent had student-loan debt in 2010, up from 19.5 percent in 2007.
  • For all households, the portion with student loan debt rose to 19.1 percent in 2010 from 15.2 percent in 2007.

The amount borrowed by upper-middle-income families, meanwhile, has soared. They owed an average of $32,869 in college loans in 2010, up from $26,639 in 2007, after adjusting for inflation, according to the Journal's analysis.

Borrowing has also increased for lower-income families, but by a smaller amount.

  • Families with lower incomes tend to send their children to lower-cost schools and to cover a greater portion of their costs through financial aid, according to Sallie Mae.
  • The typical low-income family receives grants and scholarships totaling 36 percent of the cost, the lender says, while for higher-income families such packages total 21 percent.

The figures put this segment at the heart of a larger trend striking across income groups. More than 3 million households now owe at least $50,000 in student loans, up from about 794,000 in 2001 and fewer than 300,000 in 1989, after adjusting for inflation.

Source: Ruth Simon and Rob Barry, "College Debt Hits Well-Off," Wall Street Journal, August 8, 2012.


Browse more articles on Education Issues