The student loan crisis is much worse if this claim is true.
Here’s what you need to know.
Here’s a shocking claim: 40% of student loan borrowers don’t have a college degree. Let that sink in. Imagine borrowing student loans to attend college, and then life happens. For many possible reasons, you aren’t able to finish your degree. Now, you’re earning a high school salary but owe college student loans. It’s a harrowing experience for anyone to endure. To promote wide-scale student loan cancellation, Democrats have shared a version of this story repeatedly. But is it really true? If yes, then the student loan debt crisis could be more severe than realized. If no, then the public may have been misled. Let’s explore.
Student loan cancellation: 40% of student loan borrowers didn’t graduate college?
Sen. Elizabeth Warren (D-MA) tweeted last year, “Up to 4 in 10 people with student loan debt weren’t able to graduate, many because of high costs, so now they’re in the worst of both worlds—crushed by debt, with no diploma to boost their earnings.” Warren has said that financially vulnerable student loan borrowers are the face of the student loan debt crisis. Without immediate student loan relief of up to $50,000, Warren predicts that millions of student loan borrowers could default on their student loans. So, is this correct? According to PolitiFact, a non-partisan fact-checking website, the answer is mostly yes. Here’s the basis for this surprising claim:
- Warren cited statistics from the National Center for Education Statistics;
- The data includes student loan borrowers from the 2011-2012 school year. Those student loan borrowers were tracked to determine if they graduated by 2017; and
- The result: 38.6% of student loan borrowers in those six years did not earn a college degree.
That said, this data has several problems. First, the data is based on a limited sample size from one school year. Second, some student loan borrowers could have earned their degree after more than six years of school. Third, if 40% of student loan borrowers didn’t earn a degree, that doesn’t mean they hold 40% of the $1.7 trillion of outstanding student loan debt. According to Adam Looney at the Brookings Institute, student loan borrowers with no college degree hold 23% of all student loan debt. Looney says that bachelor’s degree holders hold 64% of student loan debt. So, the claim is mostly true based on the data of this study. However, the underlying data has a limited sample size and may yield different results over eight years. So, this doesn’t necessarily mean that 40% of today’s 45 million student loan borrowers, or 18 million borrowers, lack a college degree.
Student loan forgiveness: what this means for your student loans
President Joe Biden is actively considering whether to cancel student loans for millions of student loan borrowers. However, Biden said he won’t cancel most student loan debt. This student loan debt statistic could play a pivotal role in shaping the future of student loan forgiveness. Why? First, no matter what you think about student loan cancellation, it’s troubling if 40% of student loan borrowers don’t have a college degree. Even half that number should concern policymakers. Second, supporters of wide-scale student loan cancellation could use this statistic to highlight how much student loan borrowers are struggling financially. Third, opponents of wide-scale student loan cancellation could use this statistic to support targeted student loan forgiveness only for lower-income individuals. As Biden navigates the policy and political waters of student loan forgiveness, it’s essential that you conquer your student loan debt. This includes gaining a complete understanding of your options for student loan repayment. Here are some of the best ways to pay off student loans and save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)