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Middle-income Students at Higher Risk for Student Loan Debt Than Poorer Peers

Update Date: Aug 19, 2012 12:37 PM EDT
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Research presented at the 107th Annual Meeting of the American Sociological Association have revealed that young adults from middle income families are more likely to rack up student loan debt than students from both lower and higher income backgrounds. 

Researchers said many middle income families make too much money for their children to qualify for student aid packages they may not have the financial means to cover the high costs of tuition, room and board, and additional university fees.

The researchers used a subsample of 4,414 participants in the 1997 National Longitudinal Study of Youth, which contains data on a nationally representative sample of young men and women from 1997, when they were ages 12-16, through 2009, when they were 24-28.

Researchers found that nearly 41 percent of all students left school with some student loan debt, and the average debt among those students was more than $22,000. 

Among those who incurred student loan debt, researchers found that on average young adults from middle income backgrounds, whose families earned between $40,000 and $59,000 annually, left school with over $6,000 more in student loan debt than their low income peers whose families made less than $40,000 per year. 

Students from more affluent middle income backgrounds, whose families made between $60,000 and $99,000 annually, racked up nearly $4,000 more in student loan debt than young adults whose families earned less than $40,000 per year.

Study author Jason N. Houle said there's a safety net in place for young adults from low income backgrounds.

"Financial aid distribution and postsecondary education financing seemingly play an important role in creating this non-linear relationship between income and student debt," Houle said. "Young adults whose families make just over $40,000 are less likely to qualify for such student aid packages, and tend to suffer a disproportional burden of student loan debt"

Over 90 percent of all Pell Grant recipients come from families with annual incomes of less than $40,000. 

On average among those who incurred student loan debt, students whose families earned $40,000 to $59,000 annually racked up over $12,000 more in student loan debt than their peers whose families earned between $100,000 and $149,000 per year, and over $17,000 more in student loan debt than young adults whose families made more than $150,000 annually. 

Students whose families earned between $60,000 and $99,000 incurred, on average, $10,000 more in debt than young adults whose families made between $100,000 and $149,000 per year, and $15,000 more than young adults whose families earned over $150,000 annually.

According to Houle, young adults from upper income families are more often protected from student loan debt because their high-earning parents have more financial resources to pay for their children's college education, and are more likely to have saved for college.

Houle found that young adults whose parents had less than a college degree had a higher risk for student loan debt than young adults whose parents had a college degree or more. 

African American students were also significantly more likely than their white peers to rack up student loan debt. 

Young adults with single parents or step families were more likely than students whose biological parents were together, to incur student loan debt.

As college graduates struggle to find high-wage jobs in today's economy, inflated student loan debt forces young adults to begin their careers at an increased risk of default and penalties for missed payments. Bankruptcy is not an option for students struggling to pay off their student loans, which, Houle said, makes student loan debt a very unique and dangerous liability.

"We value the American Dream and believe that achieving a college degree is all you need to overcome the disadvantages of family backgrounds," Houle said. "The fact that some young adults are starting their careers on an unequal footing just by virtue of how much money they owe, may ultimately affect their capacity to save money and their ability to take a low or un-paid but career-advancing opportunity."

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