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Knowledge@Wharton

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[1], 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[2].

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...

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