Executive Summary
—by Dr. Sandy Baum, Professor of Economics, Skidmore College.
May 1999
Sponsored by Nellie Mae Foundation
- Eighty percent of graduate student respondents borrowed to finance their studies, with median debt for graduate students (including any undergraduate debt) equaling $20,300 (average debt was $28,500), compared to a median of $12,500 for those who did not go on to graduate school. Seventeen percent of respondents borrowed more than $30,000 to finance their advanced degree. However, just over one-quarter—28%—accumulated total undergraduate and graduate education debt exceeding $30,000.
- Average debt levels for graduate students in health/medical sciences, and in law, particularly, are high enough to capture attention. Even relative to the high salaries graduates in these fields enjoy, the monthly payments they are required to make are higher than is generally considered acceptable. Twenty-two percent use over one-fifth of their monthly income to repay student loans. Most of these borrowers feel very burdened by their student loan payments.
- Graduate borrowers in the study have a median income level of $35,000, with 22% reporting 1996 personal earnings below $20,000 and, at the other end of the spectrum, 17% earning over $50,000 a year.
- Disciplines over-represented among high debt-to-income borrowers are: humanities, arts, law and health/medical sciences. Law graduates show the greatest over-representation, constituting 11% of the respondent group, but 18% of the high monthly payment-to-income group.
- Among those with monthly student loan payment-to-income ratios exceeding 10%, 76% of borrowers say they feel extremely or very burdened, while only 41% of those with low ratios gave this response. Those with high ratios are also significantly more likely to say they are experiencing more hardship than they anticipated (53% versus 23%). They are less likely to own homes and cars, although it is not possible to conclude that student debt explains this.
- Low-income graduate borrowers are much more likely to feel burdened by their loan payments, with 65% answering "1" or "2" (extremely or very burdened) on a 5-point scale, compared to 47% of those earning at least $35,000. However, the evidence does not suggest any significant differences between the two income groups in terms of the affect of debt on lifestyles.
- In some of the relatively low-paying disciplines, such as education, students are not accumulating large amounts of debt, perhaps because they anticipated moderate salaries. On the other hand, those in the arts and humanities appear to be borrowing heavily and earning lower than average salaries, and therefore have higher debt burdens.
- Students in the arts and humanities consistently expressed more discomfort with their loans than did typical borrowers in other fields. They were much less likely to say repayment was getting easier over time, suggesting that they may be less likely to see their incomes increase significantly over time. Students in these fields are more likely than others to appreciate the personal growth they experienced through their education (88% versus 82%), but less likely to appreciate their career opportunities (65% versus 74%).
- Unfulfilled expectations appear to contribute significantly to borrowers' perceptions of loan burden. The evidence suggests that borrowers whose earnings are lower than they might have anticipated are most likely to find their debts burdensome. Sixty-five percent of those with low earnings and high debt in typically high-earning fields say their loans are causing them more hardship than anticipated, compared to 52% of borrowers in typically low-paying fields.
- Debt levels and incomes alone do not explain the experiences of borrowers in repayment. For example, among older borrowers, not owning a home has an independent negative effect on attitudes towards student debt. In short, lifestyle outcomes independent of education debt burdens affect the way people think about their student loans.
For a full copy of this study contact Marie O'Malley, vice president of marketing, Nellie Mae Corporation, at (781) 849-1325 or by email at marie_omalley@nelliemae.com.