Adults who borrowed for college doubt the value of higher education, survey finds


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Diving Brief:

  • According to a report released this week by the Federal Reserve Board, adults who have borrowed for college and still owe money are more pessimistic about the value of higher education than those who have no debt.
  • Only 40% of borrowers with outstanding debt said the benefits of their education outweighed the costs. But 63% of those who borrowed and paid off debt said the same, as did 51% of those who attended college but never incurred debt.
  • Overall, borrowers with unpaid debt were twice as likely to say the cost of their education outweighed the benefits than borrowers who had paid off their debt.

Overview of the dive:

The data comes from a survey the Federal Reserve Board has conducted every fall since 2013 to assess the economic well-being of US households. This year’s report summarizes the responses of more than 11,000 people in late October and early November, before an increase in COVID-19 cases caused by the omicron variant.

The report comes at a time when higher education leaders are concerned about the value colleges provide to students — and the public perception of that value. Those discussions are closely tied to student loans, which have been at the center of the national debate as the Biden administration weighs ideas to forgive federal student loan debt. The administration is also considering how long the freeze on federal loan repayments and interest accumulation will last in the time of the pandemic.

Students who earned different types of degrees had radically different perceptions of higher education depending on whether or not they had debt. Among students who had earned a bachelor’s degree or higher, 46% who currently have debt said the benefits of higher education outweighed the costs. But 72% of those who had never had debt said the benefits of higher education were greater, as did 74% of those who had paid off debt.

A similar but smaller distribution existed among those who had earned associate degrees. While 31% of associate degree holders with debt said the benefits of higher education outweighed the costs, 49% of those who had paid off debt or had never had debt said the same thing.

“This gap indicates the extent to which perceptions of higher education are related to whether individuals had to borrow for their education and whether the returns from their education were sufficient to repay their student loans,” the report said.

About one in three adults who attended college but did not earn a degree said the benefits outweighed the costs.

The report also looks at the number of adults who have taken on student debt, how much they owe and the different forms of borrowing they have used.

Almost all of those who had outstanding student debt, 96%, had student loans. But student debt also includes credit card loans, reported by 19% of those with student debt, home equity loans, reported by 4%, and other loans, reported by 11%.

Most borrowers owe less than $25,000. A quarter of borrowers with outstanding debt had less than $10,000, 19% had between $10,000 and $19,999, and 15% owed between $20,000 and $29,999.

At the high end of borrowing, only 10% owed $100,000 or more, 5% owed $75,000 to $99,999, and 10% owed $50,000 to $74,999. That leaves about 13% ahead between $30,000 and $49,999.

Of all adults, 30% said they incurred at least some debt for their education. Among students, more than 40% said they had incurred debt.

One in five students still owed money, while 22% who had borrowed had fully paid off their student debt.

Those who attended for-profit colleges had more difficulty repaying their loans, even after accounting for differences in race and ethnicity, parental education, the fact that a college was a two-person institution or four years and the selectivity of the establishment.

“This suggests that the high rates of hardship for students at for-profit institutions reflect the characteristics of the schools and are not simply due to the characteristics of their students,” the report said.

During the pandemic, adults with unpaid student debt said their financial well-being had improved. Nearly three-quarters of adults who went to college and had outstanding student loan debt, 73%, said they were doing at least financially well in 2021. That was up from 65% who said the same in 2019.

Financial improvements were reported at all levels of education among those with unpaid debt, from those with a college education but no degree to those with a bachelor’s degree or higher.

This is consistent with the suspension of federal student loan payments, the report notes. Adults who did not borrow or who paid off student debt did not report similar improvements.

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