Some Thoughts on Student Debt

Having railed about Federal government debt for a bit, I got interested in student debt—an other end of the scale.  Specifically, I got curious about who borrowed, by chosen major field, and what the outcomes might be of those borrowings, based on salaries for jobs in those fields.  Much of the data in this post come from Steven A Harrast’s paper, Undergraduate Borrowing: A Study of Debtor Students and Their Ability to Retire Undergraduate Loans, which can be found here.  The data in this paper are from 2003-2004, so they predate the current economic dislocation, but the principles, I think, are intact.  The paper has a lot of good information in it; RTWT.

Using a student loan calculator, we can see some expected first year salaries and “affordable debt” suggestions for a number of majors.  I’ve selected four to be used illustratively throughout this post, and I used the calculator’s default values otherwise.


Starting Salary

Maximum Manageable Debt Load













These outcomes hold generally: the maximum manageable debt load is roughly the first year’s salary.  More than that is “excessive borrowing;” although this is a squishy limit.  Harrast defined excessive borrowing as “the difference between debt at graduation and lender-recommended debt level,” where the latter is based on an ability to pay 8% of a graduate’s second-year salary.  Others consider excessive debt to be total debt (which would include credit card, mortgage, if any, and the like, in addition to student loan debt) greater than 37% of income, which would lead most lending institutions to decline to lend.  All three definitions lead to substantially the same amount of “excess” for the purposes of this post.

Also, it’s clear that STEM-type majors (Science, Technology, Engineering, Mathematics) pay more, and so can borrow more, than do non-STEM majors.

Who incurs excessive student debt?  According to Mark Kantrowitz, of, that breakout looks like this for our example majors.


Per Cent Overborrowing









STEM students do better at managing their greater debts.  And importantly so: the overall average per cent of students excessively borrowing, across all majors, was 4.1%.

It’s also useful to lower the bar a bit and look at the size of excessive debt, given that it exists.  One way of looking at this is to look at the 75th percentile borrowing.


Student Loan Debt at Graduation

Excess Student Loan Debt at Graduation













*Here, an average of Consumer Science and Education and Special Education
**Here, an average of Electrical and Mechanical Engineering
***Data were not provided by Harrast.

Plainly, some jobs are more valuable than others.  More importantly, the rigor associated with learning those jobs seems to correlate well with the ability of students to manage their debt buildup, and of the newly graduated to manage their accrued debt.

As some have asked,

Want to major in gender studies, women’s contemporary literary issues, or African-American history? Feel free, but don’t expect a dime from the US taxpayer. Because you likely won’t be able to pay your debt, and you most likely won’t be able to find a job to support yourself. Which means the degree is essentially worthless. And that is a luxury this country cannot afford any longer.

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