The average millennial carries approximately $37,172 in student loans—higher than any other generation. That debt is holding up our lives by forcing us to delay buying homes, saving for retirement, getting married, and having kids.
Experian’s recent survey shows that in the last decade, student loan debt has grown from $833 billion to more than $1.53 trillion—the highest level in history. And those born between 1981 and 1996 carry a large proportion of that burden.
So what's the deal? How it is that an entire generation is getting plowed under by student loans? Here are few things that may have contributed to the problem.
Because starting salaries are often low compared to what you borrowed
As you may know from firsthand experience, not every degree will land you a job that pays well enough to comfortably afford a $400-a-month student loan payment.
You still make more, on average, with a college degree than without one. And some degrees will allow you to start your professional working life making a salary that others will only be able to attain mid-career, if ever. For example, engineers make about $64,891 in an entry-level job.
But if you take a look at the average salary across all professions, most degrees don’t come with engineer-level starting salaries. The National Association of Colleges and Employers assessed entry-level earnings across many degrees, and found that most starting salaries are in the $40,000-range.
Plus, some majors may never yield a big payoff. According to a report from Georgetown University, the following majors don’t make out so well—either mid-career or right out of the gate:
- Paralegal studies: $35,100 to start; $56,400 mid-career
- Graphic design: $40,200 to start; $61,700 mid-career
- Anthropology: $40,500 to start; $63,200 mid-career
- Fine arts: $37,000 to start; $59,600 mid-career
- Photography: $38,600 to start; 56,500 mid-career
- English: $36,180 to start; $76,500 mid-career
Because government aid is complicated
Are government subsidies pushing up the price of tuition? It's possible.
The argument goes like this: the more aid the government offers, the more colleges raise their tuition—in order to get more government aid.
Then the government offers more aid—and colleges jack their prices even more. It’s a vicious cycle.
There’s certainly evidence that this is the case. In 2015, the Federal Reserve Bank of New York published a report that showed a clear correlation between tuition hikes and an increase in federal funds.
Between 2001 and 2012, the amount of federal student loan money available grew from $53 billion to $120 billion. During the same time, college tuition shot up 50 to 65 cents on the dollar.
Under normal economic circumstances, colleges would have to keep prices down to keep their admission affordable and accessible. But with the government subsidizing so much in tuition, schools have no incentive to do that.
In fact, their incentive is to keep raising tuition—because with federal help, students will always sign on to pay it.
Because state aid isn’t keeping up
Even with increases in student aid over all those years, statistics show that students are paying more tuition out of pocket than ever.
One reason is that public institutions are facing an even bigger aid problem. That is, some state governments are starving their public universities of funding and resources.
Approximately 46 states reported spending less per student in the 2015-2016 academic year than they did before the 2008 recession hit. And after the recession, states continued to cut funding.
As recently as 2016, funding for public universities was $10 billion below what it was prior to the 2008 recession. To recoup those losses, state tuition has gone up 33% from 2007 to 2016 across the country.
What to do
If you’re struggling with student debt—and if you’re a millennial, it’s likely you are—we have good news. Refinancing your loan can save you hundreds of dollars per month, and thousands over the life of the loan.
Click here to find out how much you could save.