Editors' pick: Originally published May 20.
The Class of 2016 is leaving campus with chart-topping student debt.
Even optimistic estimates flirt with $30,000. The Oakland, Calif.-based TICAS (The Institute for College Access and Success) puts average debt at graduation at $28,930 for the Class of 2014, where seven in ten seniors had loans. The number produced by Mark Kantrowitz, publisher and vice president of strategy at Chicago-based Cappex.com, was $37,172 for 2016, up from $35,051 for the previous year.
Kantrowitz acknowledged that these results could be eye-popping. "People pay attention to milestones," he said. "When outstanding student loan debt exceeded credit card debt for the first time, then auto loans and then exceeded $1 trillion, it caught the attention of the public and policymakers. It clearly demonstrated that student loan debt was a potentially macroeconomic factor, albeit a weak one."
He stated that total student loan payments per year was about 0.4% of the Gross Domestic Product (GDP). The total outstanding loan balances--over $1.3 trillion, roughly 9% of the $19 trillion U.S. GDP, is a more sensational figure. In 2015, U.S. student loan balances surpassed the combined GDPs of Australia, Ireland and New Zealand.
"It was inevitable that student loans would eventually exceed credit card debt," Kantrowitz said. "Credit cards are repaid over months to years, while student loans are repaid over decades." He also noted that each year, there is a fresh crop of new college students borrowing to pay for school. "New debt exceeds the progress in repaying old debt." It is, he said, similar to taking two steps forward, one step back.
Kantrowitz stated that the impact on individual borrowers, which is more difficult to quantify, may also be more important. "How many students are borrowing excessively?" he said. "Is this a matter of choice or of necessity?"