A New Look At The Lasting Consequences Of Student Debt

Enlarge this image Jon Marchione for NPR Jon Marchione for NPR

Recent college graduates who borrow are leaving school with an average of $34,000 in student loans. That's up from $20,000 just 10 years ago, according to a new analysis from the Federal Reserve Bank of New York.

In that report, out this week, the New York Fed took a careful look at the relationship between debt and homeownership. For people aged 30 to 36, the analysis shows having any student debt significantly hurts your chances of buying a home, compared to college graduates with no debt. The cliche of "good debt" notwithstanding, the consequences of borrowing are real, and they are lasting.

The report paints a mixed picture of how student borrowing has evolved over the last decade, since the financial crisis. There are some bright spots: For example, student loan defaults peaked five years ago and have declined ever since.

And repayment seems to have slowed down among high-balance borrowers --those who owe $75,000 or more. Meaning, after 10 years, they have paid down only one-quarter to one-third of what they owe.

On the face, this isn't necessarily good. But taken alongside the decline in defaults, Fed president William Dudley said in a press briefing Monday, it reflects something good. That is, graduate students, in particular, are signing up for government programs intended to help make payments more affordable.

[The fate of one of those programs, Public Service Loan Forgiveness, was in doubt last week after a legal filing by Betsy DeVos's Department of Education.]

Regardless of what happens with that program and others, nothing is holding back the rise of college tuition -- up nine percent, after inflation, in the past five years at public universities. Dudley pointed out that in the last several years, public colleges have generally become less, not more, accessible to middle-income students, when you look at tuition and aid policies.

Living expenses are also a continuing burden for students, a significant number of whom are dealing with homelessness and hunger at the nation's community colleges in particular. In the absence of more targeted grant or scholarship programs, more people are taking out student loans, and they are borrowing more. All that borrowing adds up to a total of $1.3 trillion, nearly triple what it was a decade ago.

So, is college still worth it? In the most simplistic terms, yes.

Let's look back at homeownership. Attending a four-year college — even if you borrow, and even if you do not graduate — still increases your chances of owning a home, compared to people who never enroll.

More, results show that if even you come from a low-income family, graduating from college makes you almost as likely to own a home, by age 36, as someone from a high-income family.