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Something Has to Give

The latest figures show that more and more young people are taking on higher and higher levels of student debt.

Aaron R Hawkins / Flickr

Using the latest Survey of Consumer Finances, I broke out student debt levels by student debt percentiles below. This is a more comprehensive look at student debt trends than the medians and means you usually see. (Hover your cursor over the graph to get a list of values at each percentile.)

The graph shows that the starting point for student indebtedness keeps moving lower and lower in the distribution. In 1989, positive student indebtedness starts at the eighty-fourth percentile, meaning 16% of young families carried student debt. By 2016, the starting point was the fifty-sixth percentile, indicating that 44% of young families carried student debt.

Student debt levels at any given percentile have also risen substantially. In 1989, the ninetieth percentile carried $5,598 of student debt, while the same percentile had $44,000 of debt in 2016. The eightieth percentile had no debt in 1989, $1,610 of debt in 1992, and $22,000 of debt in 2016.

In the next graph, I divide student debt levels by current income in order to produce a similar distribution.

The trend here is the same. In 1989, the debt of the ninetieth percentile was 11.5% of their current income. By 2016, it was 109.7%. In 1992, the debt of the eightieth percentile was 3.9% of their current income. By 2016, it was 48.4%.

During the last decade, many thought that the student debt positions of young families were being driven by the effects of the Great Recession. But it is clear from the 2016 data that the problem remains: every year, more and more young people are taking on higher and higher levels of student debt.

These kinds of year-over-year increases in student debt levels are ultimately unsustainable. It is not possible for debt to perpetually grow faster than the capacity to repay it. Eventually something will have to give.