This week Comptroller Susan Combs released a report on student loan debt and rising tuition costs in Texas. According to the study, the average student loan debt balance for Texas-educated college graduates under 30 is $22,600, or 46 percent of average yearly earnings. And because many salaries aren’t sufficient to pay off this kind of balance, about 20 percent of student loan debt holders in Texas are more than 90 days delinquent on paying it off.
Student loan debt has completely outpaced inflation. Between 2004 and 2012, household inflation increased by 22 percent in Texas while the average student’s debt grew by 61 percent. Deregulation of Texas’s public universities plays a major role, since in-state tuition and fees have more than tripled since the previous restrictions on costs were lifted in 2003.
All of this contributes to making Texas the 9th worst state in the nation for student loan debt, according to a WalletHub analysis. The ranking is based on average student debt, the unemployment rate and the percentage of students with past-due loan balances. Even though college costs are increasing everywhere, Texans are disproportionately burdened by them.
Combs’ report also found that student debt has impacts far beyond the students who have to carry it: “Student loan debt could significantly reduce economic activity and demand for mortgage credit and negatively impact the broader economy by inhibiting entrepreneurship and the creation of small businesses.” Put more simply, if graduates are spending all of their paychecks paying down their debt, it leaves little else for buying homes, starting businesses, or making the other kinds of investments that our economy relies on.
One of the most concerning recent findings on student debt is the number of students who don’t realize how much they have, or even that they have it at all. The Brookings Institute recently released a study that asks the question, “Are college students borrowing blindly?” As you might expect, the answer is largely yes.
Only 52 percent of students surveyed were able to correctly identify within $5,000 what they paid for their first year of college. One-fourth of students underestimated it, and a full 7 percent actually had no idea. Perhaps the most shocking finding was that 28 percent of students with federal loans did not know they had any federal debt, and 14 percent said they didn’t have student debt at all.
This issue is not just that tuition is out of control, but also that many Texas students aren’t even aware of what they’re getting themselves into when they take on debt.