So much for earning $1 million, or the revised $800,000, with a university degree.
According to a new study by the Pew Research Center, college graduates under the age of 40 who have student debt maintain a median net worth of just $8,700. This is a lot lower when compared to a college graduate in the same age bracket who did not take out any student loans.
In addition, when all debts are accounted for, such as credit card debt and automobile loans, the median debt for under-40 college graduates is $137,010. Again, when compared to non-indebted under-40 college graduates, the figure is $73,250.
Let’s face it: with increasing price inflation, $8,700 cannot purchase a lot.
“Young adults with student loan debt are starting out behind in building their nest eggs,” said Richard Fry, the lead author of the new study. “College grads with student loans are benefiting from higher incomes because of their degrees, but about four in 10 borrowers are weighed down with a substantial amount of debt that extends beyond student loan debt.”
Besides mortgage debt, total student loan debt has exceeded $1 trillion and is the biggest non-mortgage consumer debt. Furthermore, the 90-plus day delinquency or in default rate has soared to 11 percent, which is substantially higher than credit cards, auto loans and mortgage payments.
A major factor to the exponential student loan debt crisis that many do not consider is the fact that governments are complicit. Tuition rates regularly rise at high levels because the federal and state governments guarantee student loans and universities and colleges will raise tuition fees accordingly.
This was something that U.S. Vice President Joe Biden agreed with in 2012. “By the way, government subsidies have impacted upon rising tuition costs. It’s a conundrum here.”
The student debt crisis is also causing major strife in the economy because graduates are unable to accumulate assets, save enough money to obtain a mortgage or to even create a retirement planning savings and investment plan.
Previous studies published over the past year have discovered the income gap between college graduates and individuals without a college degree is shrinking. This fact isn’t just in the United States, but also prevalent in Canada and in other Western countries.
Andrew Sum, director of the Center for Labor Market Studies and a professor of economics at Northeastern University, told the Chronicle of Higher Education that a “larger share of college grads are ending up in jobs that don’t require college degrees.”
The youth unemployment rate in the U.S. is just under 13 percent.