Dartmouth professor helps lead study into student loan debt

Jul 07, 2017


Debt, Loan


Surprising Study Results Show That Student Loan Debt Is Not A Reason To Move Back In With Mom and Dad. When the typical college graduate owes more than $30,000 in student loans, the widespread assumption in that the young adults are likely to move back in with their parents. Students would need to earn at least $30,000 per year afford $300 a month for ten years to pay off their student loan debt, which is difficult for graduates taking entry level positions in certain fields.

Debt Does Not Drive Graduates Home

Moving back home, or boomeranging, surprisingly is not more evident in young people saddled with student debt. A Dartmouth-led study led by co-authors Jason Houle and Cody Warner found that those who did return home actually had less student debt than those who did not return home. Those who did not complete their college degree, but still had student debt, had a 40 percent greater likelihood of moving back into their parent’s home than those who completed their degree, most likely because of the limited higher-paying positions open to them without a degree.

Race and SES Makes A Difference

In general, young graduates are not returning home in droves to save enough to pay down their student debts, however, black college graduates were about 10 percent more likely to boomerang back home than white graduates. The authors of the paper put forth several theories, including blacks may have loans with higher interest rates and they may face discrimination in the job market, which limits their earning potential.

Houle explored this topic further in his 2013 paper, Disparities in Debt Parents’ Socioeconomic Resources and Young Adult Student Loan Debt, where he stated that young adults from lower social economic backgrounds had student loan debts that are higher than the national average, while graduates from high-income families were relatively protected from overwhelming debt. Nevertheless, with rising college costs, debt is inevitable for most young adults who want a degree.

Post College Plans

Unsurprisingly, Houle found that recent graduates’ plans immediately after college affect their desire to move back home. Young adults are postponing marriage, therefore, they see no reason to saddle themselves with a mortgage, which would mean additional debt. In certain careers, an unpaid internship is vital to securing a position, making it vital for a graduate to live at home during the internship.

Reasons Young Adults Live at Home

More millennials live in their parent’s home as opposed to any other living arrangement. The authors acknowledge that there could be multiple factors besides indebtedness that affect a young person’s decision to boomerang or to get their own place.

Sky-high rents in New York City and other urban areas where graduates begin their careers make renting an apartment nearly impossible for someone with an entry-level job. The average NYC apartment going for $3516 , which wouldn’t be such a hardship for a recent graduate in a high paying field, but for graduates who majored in elementary education or social work, the rent is impossible.

The study did not address recent graduate’s majors, however, starting salaries vary widely between fields. A young man or woman who graduates with a degree in computer programming will earn enough to afford an apartment in most areas while paying back student debt, assuming that they have good money management skills.

The authors’ goal was to encourage students to view student debt as an investment in themselves and their future, not a burden that will keep them tied to their parents after graduation. In addition, the study wanted to determine if student loan debt is a problem, which it is for black students who are charged higher interest rates on their student loans, making it more difficult for them to repay the loans and maintain their own residence at the same time.

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