Lots of people have student loans: more than 45 million people. They collectively owe about $1.6 trillion.
That is, of course, a lot of debt — but amid all the national debate right now about what to do about it, it's important to remember that not all debt is created equal, and some borrowers are struggling more than others.
"The large debts we hear about are often taken out by graduate students — people who get an MBA or who get an M.D. or get a law degree or get a master's," says Susan Dynarski, an economist at the University of Michigan.
Those aren't the folks to worry about, Dynarski says. Neither are borrowers who got their bachelor's degree — who on average have about $30,000 in loans after graduation. For many of those borrowers, the loans did their job: They allowed students to go to college, get their degrees, land a better job and, ultimately, pay back those loans.
The people who are really struggling, experts say, are the roughly 1 million borrowers who default on their student loans each year — about 7 million borrowers in total at the end of 2018, according to the latest numbers from the U.S. Education Department.
Defaulting "is not the only sign of struggle, but it's the worst sign of struggle," says Ben Miller, vice president for postsecondary education at the left-leaning Center for American Progress.
When you're in default, the government can take your tax refund or part of your paycheck. When you get older, you can even lose part of your Social Security.
These are the people, experts say, that give us a clear idea of who is struggling the most with student debt. And the size of those loans is smaller than you might think: "The typical defaulter has under $10,000 in debt," Miller says.
Borrowers with debt and no degree
"The people having problems with their debts are those who dropped out of school after just a few courses or a year," Dynarski says.
The default rate among borrowers who didn't complete their degree is three times as high as the rate for borrowers who did complete. When these students stop taking classes, they don't get the wage bump that graduates get that would otherwise help them pay back their loans.
"Getting a degree really does make a difference," says Tiffany Jones, the director of higher education policy at the Education Trust.
There are other inequities in the distribution of loans and defaults, too.
Half of African American borrowers who took out loans for the 2003-2004 school year had defaulted after 12 years, according to federal data. Because black students have less generational wealth on average, experts say, they're more likely to borrow in the first place. They're also more likely to attend for-profit schools, and they often earn less money after college.
Even African American borrowers who graduate with a bachelor's degree still default about four times more often than their white counterparts.
"In other words, the bachelor's degree can't completely wipe away issues related to race," Miller says.
Students who receive a Pell Grant — that's the program that provides free money for low-income students — are also more likely to default.
Dynarski explains it this way: If you are a low-income student and you take out loans in addition to Pell Grants, but then drop out and don't earn a degree, then you probably aren't getting a wage bump to help you pay back those loans.
"If you look at the likelihood that someone is going to default, it actually drops as debt goes up," Dynarski says. "That sounds completely counterintuitive, but that's because the missing piece here is earnings. You can't pay off a debt if you don't have any money."
People who went to for-profit colleges
Though for-profit institutions only serve about 10% of students, these students are more likely to default.
When the government looked at the default rates for student borrowers, they found it was nearly double at for-profits what it was at community colleges: of defaulters, just 26% started at community college, while 52% attended a for-profit institution.
For-profit schools are more expensive than community colleges, so students who attend them are more likely to borrow. For-profits also have low graduation rates, so lots of students who start there do not finish, and of those who do, the credentials are less valuable. With that in mind, when you look at all students — not just borrowers — who attend a for-profit college or university, they are four times more likely to default on their loans than community college students.
As Dynarski puts it, often students who attended for-profit colleges have "little education, lots of debt." That's because "the for-profits have very high default and very high dropout rates."
In the audio of this story, as in a previous Web version, we say that when you're in default, and you get older, you can lose your Social Security. In fact, the federal government can take part, not all, of your monthly Social Security benefits.
STEVE INSKEEP, HOST:
Americans now owe more than $1.5 trillion in student loan debt. But not all debt is created equal. Among the 45 million Americans who hold that debt, some are well-positioned to pay off their student loans and some are not. NPR's Elissa Nadworny reports on what makes the difference.
ELISSA NADWORNY, BYLINE: So who are these borrowers?
TIFFANY JONES: Most students (laughter). So that's the easy answer in this.
NADWORNY: Tiffany Jones is director of higher ed policy at The Education Trust, a nonprofit advocacy group. And she's quick to point out, yeah, lots of students borrow. According to the federal government, more than 60% of college students use federal loans to help them pay.
JONES: It's unaffordable for students to attend college, and they are attending anyway because it's important in terms of getting a job, and they're having to borrow in order to attend.
NADWORNY: But as candidates talk about debt forgiveness, it's important to note that, for some of these people, the loans did their job - they allowed folks to go to college, to get their degrees, to land a better job - and so now they're able to pay back those loans. Here's economist Susan Dynarski from the University of Michigan.
SUSAN DYNARSKI: Would people rather have no debt at all? Yes, that's true - everybody. Who is having a hard time with the debt? It's a fairly narrow slice of the population, and it is not the people who went to grad school, and it's not the people who graduated with their BAs.
NADWORNY: They often get better jobs and can pay off their loans. It's the folks that have smaller loans and no degree that we need to be worried about.
DYNARSKI: The typical borrower that's having a hard time has a loan under $10,000.
BEN MILLER: Probably the single biggest mistake I see people make is the assumption that high levels of debt automatically correlate with struggle.
NADWORNY: That's Ben Miller from the left-leaning Center for American Progress. He's studied default rates. Default - that's what it's called when you don't pay back your student loans.
MILLER: It is not the only sign of struggle, but it's the worst sign of struggle.
NADWORNY: When you're in default, the government can take your tax refund or part of your paycheck. They can even take your Social Security when you get older. Every year, about a million student borrowers default, and they give us a clear sense of who is really struggling. Tiffany Jones from Ed Trust says those people are typically...
JONES: Students who start college but do not complete, low-income students and black students in particular.
NADWORNY: According to federal data, half of African American borrowers who took out loans for the 2003-2004 school year defaulted after 12 years. Some factors for why black students have a higher burden - they're more likely to borrow money in the first place; they often have less generational wealth; they're more likely to attend for-profit schools; and they often earn less money in the workplace. Even black borrowers who graduated with a bachelor's degree, they're still defaulting at a rate about four times higher than their white counterparts.
MILLER: In other words, the bachelor's degree can't completely wipe away issues related to race.
NADWORNY: Students who receive a Pell Grant - that's free money for low-income students - are also more likely to default. Dynarski, the economist in Michigan, explains it this way - if you're a low-income student and you take out loans but drop out so you don't get that degree, you probably aren't going to get a wage bump to help you pay back those loans.
DYNARSKI: If you look at the likelihood that somebody is going to default, it actually drops as debt goes up. Now, that sounds completely counterintuitive, and that's because the missing factor here is earnings. You can't pay off a debt if you don't have any money.
NADWORNY: Another group of people who are really struggling with student loans - those who went to for-profit colleges.
DYNARSKI: The for-profits have very high default rates, very high dropout rates.
NADWORNY: For-profits serve about 10% of students but are overrepresented in the default data. Because for-profit students are likely to borrow more money, they're four times more likely to default on their loans than community college students. And here's one more thing to consider amid this talk about debt forgiveness and student loans - if the government wipes out that $1.6 trillion, the following year, there will still be millions of new students headed to college who will need to borrow money to pay for it.
Elissa Nadworny, NPR News.
[POST-BROADCAST CLARIFICATION: In this story we say that when you're in default, and you get older, you can lose your Social Security. In fact, the federal government can take part, not all, of your monthly Social Security benefits. ] Transcript provided by NPR, Copyright NPR.