Freedom Dreamers: The Faces of Student Debt

In a recent Instagram discussion about student debt for the Congressional Black Caucus, Rep. Ilhan Omar quoted Black Lives Matter founder Alicia Garza as saying, "We're not freedom fighters, we're freedom dreamers." Rep. Omar, who has student debt of her own, went on to say: "We can all dream, and envision, and make it happen: a world without student debt."

Who are the people dreaming of a world without student debt? Who holds it, and who will benefit if--or when--that debt (currently $1.7 trillion nationally) is canceled in full?

It's no secret that millennials are heavily burdened by student debt. But many people will be surprised by some of the other groups who are especially harmed by student debt. They include Black Americans, seniors, Southerners, and women.

Student debt also harms people who have no debt of their own - including unemployed and under-employed workers, small business owners, and the nation as a whole. Millions of people don't even know they're being harmed by student debt, but should be dreaming of a world without it. The facts are staggering.

Women

We're fortunate to live in a time when society is becoming aware of the many ways we hold women back. We are finally telling girls and young women they can dream bigger dreams. But, at the same time, we are burdening millions of them with debt for pursuing those dreams - and that debt often holds them back from achieving them.

Women hold roughly two-thirds of all student debt in this country, as the American Association of University Women (AAUW) has noted.

Student debt is one way women are oppressed. Women hold roughly two-thirds of all student debt in this country, as the American Association of University Women (AAUW) has noted. That comes to more than $1 trillion in women's debt alone.

Women who take on student loans must then face a gender pay gap when they enter the workforce. That pay gap is greater for higher-paying jobs. A report from the Georgetown University Center on Education and the Workforce found that men in high-paying fields earned from 17 percent to 43 percent more than women. As Georgetown researchers note, "Over the course of a career, the gender wage gap results in women earning $1 million less than men do."

Georgetown researchers also found that, on average, women with graduate degrees earn roughly as much as men who only have bachelor's degrees. And, in many - if not most - cases, those graduate degrees will result in more student debt.

The AAUW also found that Black women graduate with more debt on average than any other group of graduates, and that women who attend for-profit colleges owe much more on average than students at traditional public or private institutions.

Black Americans

Student debt makes the racial wealth gap worse. A 2016 study by the Brookings Institution concluded that "black college graduates owe $7,400 more on average than their white peers ($23,400 versus $16,000, including non-borrowers in the averages)." Even worse, Brookings found that black-white debt gap quickly triples to $25,000. The report says,

"Differences in interest accrual and graduate school borrowing lead to black graduates holding nearly $53,000 in student loan debt four years after graduation--almost twice as much as their white counterparts."

Many student loan borrowers find it hard to lower the principal they owe, and this problem is especially acute for Black and brown Americans. A 2018 sociological study found that "racial inequalities in student debt account for a substantial minority of the black-white wealth gap in early adulthood and that this contribution increases across the early adult life course."

The researchers concluded that "student debt may be a new mechanism of wealth inequality that creates fragility in the next generation of the black middle class."

Similarly, a 2017 analysis by the Center for American Progress found that Black borrowers owed 113 percent of the original loan amount twelve years after graduation, with Latinos owing the second-largest percentage (83 percent). For these and other reasons, Darrick Hamilton and Naomi Zewde wrote:

"Only full cancellation completely protects the vulnerabilities of Black students and students in general, while at the same time establishing higher education as a universal right and offering restitution to all those who have had to rely on debt finance."

Spouses and Immediate Family

Even the statistics don't reveal the whole truth about the people directly burdened by student debt. Reports tell us that approximately 47 million Americans have student debt. But that figure doesn't reflect the real number of people who carry this burden. Many of those 47 million people share their debt with family members, because they live in a household with shared financial responsibilities. The loan payments come out of a shared household budget.

In our work, for example, we have spoken with many people who found that the debt held by one or both partners weighed heavily in their decision to get married.

"For richer and for poorer, in sickness and in health, with student debt or without ..." Education should not come between potential spouses, or weigh heavily on the burdens of a new (or not-so-new) marriage. Nor should it weigh on multiple-generation households.

The average household size in the United States is slightly more than 2.5 persons. Student debt holders may be slightly more likely to live alone than the average, since they are younger on average. And some household members may have separate finances.

How many people are really burdened by this debt? Is it 100 million? 80 million? We can't be certain. Even when adjusting for those factors, however, we know that the number of people directly paying for student loans must be much higher than 47 million.

Seniors

Experian reports that student debt for borrowers in their 50s went up 5.6 percent in a single year. It went up 4.5 percent for borrowers in their 60s, and 3.4 percent for borrowers in their 70s. The Department of Education reports that the number of student debt borrowers aged 62 and older increased 17 percent in 2019, the biggest increase for any age group. The second-highest increase was for borrowers aged 50-61.

The total amount or student debt held by people 65 and older grew from $2 billion in 2005 to $22 billion in 2015, a tenfold increase in ten years. In 2015, an estimated 173,000 people had their Social Security benefits garnished over defaulted student loan debts, including 114,000 people 50 years of age or older. 67,300 of them had income below the poverty line.

We have reached the point where student debt is haunting people well into their senior years.

Blue-Collar Workers

A 2018 macroeconomic study from the Levy Institute concluded that cancelling all student debt would spur economic growth and create millions of jobs over a ten-year period. Those aren't just jobs for college graduates. They include jobs in restaurants, travel, and tourism (when those activities fully resume), and in retail, construction, and other industries.

Some blue-collar workers are almost certainly jobless because of student debt, while others could be earning more on the job.

Realtors and Builders

The housing industry, from building to sales, is also a victim of student debt. In 2019, a study by economists for the Federal Reserve found that, between 2005 and 2014, roughly 20 percent of the decline in home ownership among young adults could be attributed to higher levels of student debt. They found that a $1,000 increase in student debt reduced homeownership rates by 1.8 percent.

If more Americans were freed from the student debt trap, more would be able to buy homes. In turn, spurring more housing production and creating more good-paying jobs.

Southerners

Financial advisor Rebecca Safier looked at the areas with the highest rates of student loan delinquency. She found that 14 out of the top 15 were located "below the Mason-Dixon line." They included Memphis, TN; Jackson, MS; Winter Haven, FL; and Daytona Beach, FL.

Student debt is often considered a problem of the coastal elites. The numbers say otherwise.

Small business owners

In a 2015 study for the Federal Reserve Bank of Philadelphia, "The Impact of Student Loan Debt on Small Business Formation," economists found that student debt depressed the formation of new small business - that is, businesses with one to four employees.

As the authors wrote, "Small businesses are the backbone of the U.S. economy and account for approximately one-half of the private-sector economy and 99% of all businesses."

Parents

Parents carry a heavy, and growing, student debt burden. The federal government has a program of "parent PLUS "loans who want to borrow to finance their children's education. According to data from the National Student Loan Data System (NSLDS), the number of loans issued under this program increased by roughly 13 percent between the second quarter of 2014 and the second quarter of 2020. At the same time, however, the total amount owed rose by nearly two-thirds, from $62.4 billion to just under $100 billion.

Parent PLUS loan terms are even more stringent than direct student loans. Unlike student-borrowed debt, interest is charged on parental debt while their child or children are still studying. Interest is charged even when payments are deferred. Parents cannot limit their payments through income-based repayment plans, as student borrowers can do for federally-backed loans. And new debts can be added onto the loan, even if the parents do not specifically request that additional disbursements be made.

Unfortunately, student loan payments for parents often persist even as retirement loom, fueling an ongoing retirement crisis in the United States. A 2018 report from the National Institute for Retirement Security says, "Even after counting an individual's entire net worth--a generous measure of retirement savings--three- fourths (76.7%) of Americans fall short of conservative retirement savings targets ..."

Student debt adds to the financial security gap for older Americans.

Young People

Many people know that millennials are the most student debt-ridden generation in history, with Generation Z gaining fast. Far fewer people know how bad their situation has become. One-third of all young adults (people under 30) have student debt, according to Pew Research, as do one in five adults between the ages of 30 and 44. More people have needed loans for their education in recent years than in previous decades. Roughly 60 percent of college seniors in the 2015-2016 school year had borrowed for their education, up 20 percent from 1999-2000.

And they're borrowing more. The average household (two or more people) with student debt now owes $46,459, according to one survey. Experian reports that the average individual with student debt owed $35,359 in 2019, a 26 percent increase over 2014 and an increase of 116 percent over ten years.

When it comes to student debt, young borrowers have been doubly burdened. After the 2008 financial crisis, young people entered the second-worst job market in nearly a century. Unemployment and under-employment early in a career can affect a person's entire lifetime earnings. Now, with the mismanagement of the Covid-19 crisis, many more are graduating into the worst job market in a nearly a century. The promises that were made - that a college degree "pays for itself" - have never been proven in studies, and are even less likely to be true now.

We Are All Freedom Dreamers

The Levy Institute report shows that the entire US economy would grow if we cancelled all student debt. That means that everyone is being held back in some way by student debt. Not everyone is a "freedom dreamer" yet, however, when it comes to student debt. Some of us don't even know how it's holding them back. Others know all too well, but don't believe that it's possible to cancel it.

Sadly, many people even blame themselves for their student debt. They're wrong. Society has failed them, not the other way around. They were sold a false promise: that if they took on a mountain of debt, it would pay for itself with higher wages. For many, that simply wasn't true. For many others, education was not a financial investment, but a pursuit of higher ideals. Education benefits everyone. It should build dreams, not crush them.

A shared dream is a powerful force for change. It's time to share the dream of freedom from student debt.