Study Paints Murky Picture for Borrowers Who Graduated During the Great Recession

By Allie Bidwell, NASFAA Senior Reporter

Although the majority of student loan borrowers who graduated at the onset of the Great Recession say their education was worth the cost, many also reported having high levels of stress, and delaying significant life milestones such as buying a home, getting married, or having children, according to a new report prepared by RTI International for the National Center for Education Statistics (NCES).

The data used in the report was generated from the recently-released Baccalaureate and Beyond Longitudinal Study, which interviewed students who graduated in 2007-08 four years after they completed their programs. Overall, 69 percent of those graduates who took out student loans said their undergraduate education was worth the cost, compared with 81 percent of non-borrowers. Still, 44 percent of borrowers said they delayed purchasing a home, and 26 percent said they delayed getting married. By comparison, 23 percent and 14 percent of non-borrowers answered those questions the same way.

The report gives a glimpse into some of the outcomes and actions of students who graduated as the recession was beginning.

"Those who graduate with a bachelor's degree are more successful in repaying their student loans and have lower rates of default than those who do not earn a bachelor's degree. However, our analysis shows that graduates may be feeling the effects of student loan debt in other ways," said Melissa Cominole, RTI research education analyst and co-author of the report, in a statement. "From taking an undesirable job to delaying buying a home, students who graduated with high levels of debt during the most recent economic recession report that they are experiencing the impact of their education costs when asked four years after graduation."

The study also looked in to employment outcomes, loan payment-to-salary ratios, monthly salary, and occupation, among other characteristics. The graduates were also surveyed on their stress levels. Unsurprisingly, self-reported stress levels tended to rise with the respondent's cumulative amount of debt, debt payment-to-salary ratio, and annual salary.

While the report paints a picture of some of the situations that can be related to student debt, Robert Kelchen, an assistant professor of higher education at Seton Hall University, cautioned against inferring a causal relationship between debt and negative consequences tied to life milestones.

Research has shown that generally students who take on some debt, but complete their degree programs are better off than those who drop out of college with debt. And as Kelchen pointed out on Twitter, there are some factors that might not have been accounted for, such as family income and background.

For example, April 2017 data from the Federal Reserve Bank of New York found that getting a college education, regardless of whether the graduates took on debt to do so, is associated with a "markedly higher homeownership rate." Furthermore, the briefing said college attendance appeared to mitigate the "impact of economic background on homeownership rates."

"My biggest fear: Folks see these headlines and tell students that student loan debt is awful," Kelchen tweeted. "But if you need loans to complete, you're better off graduating with debt than dropping out without."

 

Publication Date: 5/8/2018


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