That rising student debt is one of the creeping threats of our time is hard to refute.

Student debt has more than tripled since 2004, reaching $1.52 trillion in the first quarter of 2018, according to the Federal Reserve — second only to mortgage debt in the U.S. College costs have outpaced the Consumer Price Index more than four-fold since 1985, and tuition assistance today is often harder to come by, particularly at schools without large endowments.

“There has been a big shift in terms of who should bear the burden of the cost of education,” said Benjamin Keys, a Wharton real estate professor with a specialty in household finance and debt. “We know the stories of our parents, that they could earn enough working as a lifeguard in the summer to pay for a semester of college. The growth of tuition costs relative to teen wages — indeed, all wages — has veered sharply upwards.”

“We’ve come to a place where most students have to borrow in order to pay the cost of completing a bachelor’s degree,” said University of Pennsylvania professor Laura W. Perna, executive director of Penn’s Alliance for Higher Education and Democracy.

About 44 million graduates hold student debt, and today’s graduates leave school holding promissory notes worth an average of $37,000, raising concerns that the burden is creating a cascade of pressures compelling many to put off traditional life milestones. The storyline, as it has emerged, is that college debt delays buying a house, getting married, having children and saving for retirement, and there is some evidence that this is happening.

But the truth is more nuanced, and, statistically at least, the question of how burdensome student debt is and the extent to which it is disrupting major life events depends on a number of factors, including when you graduated from college with debt. For those who graduated with debt as the economy was crashing, it was a double-whammy, said Keys, “so you’re seeing delayed marriage, delayed child-bearing, which are at least in part a function of the ongoing damage from the Great Recession.”

“They are certainly starting off at a disadvantage relative to previous generations, and a lot of the scrutiny of millennials is really misplaced given the disadvantages they’ve had in terms of their costs of education and poor labor market upon entry,” Keys continued. “It’s hard to say that they won’t eventually catch up. It depends on the health of the labor market, and how stable the economy is.”

Before the Great Recession, student debt levels were below auto loans, credit card debt and home-equity lines of credit in the ranking of household debt. Since then, student loan debt has surpassed these other debts, according to the Federal Reserve Bank of New York.

Indeed, a 2017 Federal Reserve study which sampled mostly pre-recession data found a correlation between higher student debt and lower homeownership. “A $1,000 increase in student loan debt lowers the homeownership rate by about 1.5 percentage points for public four-year college-goers during their mid 20s, equivalent to an average delay of 2.5 months in attaining homeownership,” write Alvaro A. Mezza, Daniel R. Ringo, Shane M. Sherlund and Kamila Sommer in “Student Loans and Homeownership.” The study cites others that find that greater student debt can delay marriage and having children, as well as reduce the probability of undertaking graduate or professional degree programs or taking a lower-paying public interest job.

“It’s changing the culture of America,” said Christopher Peterson, a University of Utah law professor and consumer finance expert, during a recent segment on the Knowledge@Wharton radio show on SiriusXM. “It doesn’t have to be this way. A lot of advanced industrialized countries manage to provide education for their citizens without inflicting this long-term debt burden on young people.”

Why worry about any of this? What is the larger public benefit to promoting a more advanced level of education in the populace generally?

“The growth of tuition costs relative to teen wages — indeed, all wages — has veered sharply upwards.”–Benjamin Keys

“Higher education is increasingly important to individuals and our society,” said Perna. “Individuals who attain higher education average higher salaries, which translates into a higher tax base. With higher levels of education attainment, there is also less reliance on social welfare programs, as individuals who attain higher education are more likely to be employed, less likely to be unemployed, and less likely to be in poverty. Higher levels of education are also associated with greater civic engagement, as well as lower crime.”

As for the effect on the economy in general, Federal Reserve chairman Jerome Powell said in March that slowed growth isn’t showing up in the data yet. But, he warned: “As this goes on and as student loans continue to grow and become larger and larger, then it absolutely could hold back growth.”

All Debt Is Not Created Equal

Student debt is obviously a problem generally, said Douglas Webber, an economics professor at Temple University, but whether debt spells trouble for a particular student depends very much on a number of specific factors.

“People are drawn to the New York Times story about the person $100,000 in debt because that is an extreme story, but that is actually really unrepresentative of the average borrower,” said Webber. “Less than 5% of students have that much, and that’s leaving out all the people who don’t borrow, so that’s a pretty small fraction of students. And most with that level of debt are going to law school or medical school, so that is very likely to pay off. I’m not saying there aren’t people who get $100,000 in debt and that we shouldn’t care about them. But they are very unrepresentative of the problem.”

In 2014, the largest chunk of student debt — nearly 40% — belonged to people owing between $1 and $10,000.

The bigger problem, Webber said, comes when students take out loans and then don’t graduate from college. “The vast majority of the college premium is stored up in actually getting that degree. So if you have $5,000 or $10,000 in student loans that cannot be discharged in bankruptcy — and only in very rare circumstances can they be discharged in bankruptcy — but only have the labor market opportunities of someone with a high school diploma, that ends up being a really bad situation for a lot of people.”

Nationally, 60% of people who start at a four-year institution wind up graduating within the next six years.

“It is very hard to predict which jobs will be hot, and using college just as the basis for getting your first job makes it a poor investment over the lifetime.”–Peter Cappelli

There are other ways in which all debt is not created equal. “Many of the people who have the largest loans and are the most likely to default are also the people who got the worst credentials and poorest quality training when they graduated or potentially didn’t even graduate,” said Peterson.

In some cases, students are going to “less than savory education providers, these predatory college models where they aren’t really getting anything in terms of marketable skills,” said Cliff Robb, a professor of consumer science at the University of Wisconsin-Madison, also on Knowledge@Wharton on SiriusXM.

But although $1.5 trillion is a big number, it may not be an unreasonable amount given the value it is creating. “It’s a lot of money, but a bubble is when the price of something dramatically exceeds the actual value of that asset,” said Webber. “For the average student, the value of a college degree is still very high and far exceeds the price of going to college.”

That value has only risen in recent years. In 2002, a bachelor’s degree holder could expect to make 75% more than someone with just a high school diploma, and nearly a decade later that premium had risen to 84%, according to the Georgetown University 2011 study “The College Payoff: Education, Occupations, Lifetime Earnings.”

A bachelor’s degree is worth about $2.8 million over a lifetime, the study also found.

Education debt is generally “good debt” and is a problem for students who are not doing well in college or not taking challenging courses or majors, said Wharton professor of business economics and public policy Kent Smetters, faculty director of the Penn Wharton Budget Model. “Getting a communication degree today, for example, is less valuable than in the past unless you know modern technologies — for example, SEO — to help with obtaining a good job.”

Still, if not all debt is created equal, neither are some of the payoffs. Women working full time were found to earn 25% less than men, the Georgetown study concluded, and, at the highest education levels, African Americans and Latinos could expect to earn close to a million dollars less than their white and Asian counterparts over a lifetime.

Following Borrowers into Retirement

Good investment or not, student loan debt is creating ripples later in life — sometimes much later. A 2014 U.S. General Accountability Office study of student debt for older Americans uncovered a surprising trend: Although it is a small number, a percentage of Americans age 65 and older are carrying student debt, and the number is growing. Households headed by 65- to 74-year-olds with student debt grew from about 1% in 2004 to 4% in 2010. “While those 65 and older account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013,” the GAO found.

“It doesn’t have to be this way. A lot of advanced industrialized countries manage to provide education for their citizens without inflicting this long-term debt burden on young people.”–Christopher Peterson

In a new, as-yet unpublished study, Wharton business economics and public policy professor Olivia S. Mitchell and her coauthors tallied data on people ages 55-64 who responded to the 2009 National Financial Capability Survey (NFCS) and found that among this group on the verge of retirement, 15% had a student loan for themselves or their partners, children, grandchildren, or others. Of those who held these student loans, over half (56%) had not tried to figure out their monthly payments, one fifth (20%) didn’t know whether their payments depended on their income or not, and 44% were concerned about their ability to pay off these student loans.

“Over half of the respondents with student loans said they would have handled their finances differently if they had the opportunity to do it over again,” said Mitchell, executive director of the Pension Research Council.

Mitchell and her colleagues also examined survey respondents to the next NFCS — in 2015 — from people age 56-61, and found that 6% of this age group reported still having student loans for their own education. The student loan debt burden varied substantially by income: 11% of those with under $35,000 in household income had student loans, compared to only 2% of those making $75,000 or above. Moreover, the student loan debt burden was also higher for African-Americans, with 17% reporting owning student loans, versus 5% for whites.

“These patterns are contributing to rising financial fragility in retirement,” said Mitchell.

One poignant statistic from the GAO: In 2014, 3% of Social Security recipients had their benefits checks garnished for student loan repayments.

Easing the Burden

Some other countries have devised creative ways of handling repayment of debt. Australia has a system that links the repayment of loans with the tax system. “Income-driven repayment options have been created in the U.S.,” said Perna, “but these options are more cumbersome and administratively complex than in Australia and some other nations. By linking the amount of the monthly payment to an individual’s income, income-driven repayment options can help to protect borrowers against the risk of non-repayment. But a more seamless system wouldn’t require borrowers to annually report their income to the U.S. Department of Education.”

“These patterns are contributing to rising financial fragility in retirement.”–Olivia S. Mitchell

“Promise” or “free tuition” programs cropping up in some states are also worth examining, Perna said. New York, Maryland and other states have proposed new and expanded programs to pay college costs for eligible students. “The movement toward these programs suggests an opportunity to think about how different sources of financial aid come together to ensure that all students have the financial resources that are needed to pay the cost of going to college.”

Pell Grants, designed to help lower-income students, haven’t kept pace with the growth of tuition, and so “over time, their purchasing power has declined,” notes Perna.

An expanded income-based repayment system “should be the standard for students,” said Webber, with low payments or none at all for those making little money. “It should be a little kinder to people at the lower end of the distribution but for people who are making more, it should be maybe not as generous as they are being right now. If you are getting the benefit of a college education and get a job that pays you a lot of money, you took out the loans, you should be paying for it. But we also want to provide a safety net for the people who didn’t get the same, whether it’s luck or whatever.”

The other big policy change Webber would like to see is substantially increased accountability for one of the major players in the student loan system: schools. “Right now there is, frankly, very little accountability that schools have; they practically have no skin in the game. If students default on their loans, there is no bad effect for the school.”

A risk-sharing system that penalizes schools turning out students with higher default rates — by charging schools, say, 5% of the defaulted amount — would nudge the system in the right direction. “If [schools] are doing a lot of damage to students and also the taxpayer — because when students can’t pay their loans it’s the taxpayer who pays — then those schools should be weeded out of the system,” said Webber.

Other larger economic trends could alleviate pressure on student-debt holders over time, depending on who they are. Keys points out that younger student-debt holders who may be delaying milestones like marriage and a first home purchase might get extra help later. “The other piece of this is generational,” he said. “It’s the baby boomers and older cohorts who have the vast majority of wealth, and eventually millennials will inherit some of those resources. Whether they will be behind their parents and grandparents in terms of improved standards of living is an open question.”

“Right now there is, frankly, very little accountability that schools have; they practically have no skin in the game.” –Douglas Webber

Of course, that only applies in cases where there are assets to inherit.

Whether or not to avoid incurring debt, students today are focused “even more on the job market in choosing college majors,” said Wharton management professor Peter Cappelli, director of the school’s Center for Human Resources. “That’s not a great thing because it is very hard to predict which jobs will be hot, and using college just as the basis for getting your first job makes it a poor investment over the lifetime.”

The hope on rising student debt was that the economic upturn would start to take care of the problem, said Cappelli. “It certainly helped, as there are more jobs and fewer graduates whose loan debt keeps growing while they have no ability to even make payments. The lack of income growth, though, especially for those at the bottom of the ladder — as many students are when they start out — is the main problem now. For many students, they can make their payments but do little else: They can’t buy houses or start families.”