Excerpted from the 2015 Spring Newsletter
$2.5 billion a year goes to loan repayment instead of commerce
By Anastasia Wilson
Anyone concerned about student debt in our state can look up the statistic: in 2012 about 66% of students graduated with an average of $28,565 in student loan debt (in constant dollars). And the number keeps growing!
That number is large enough to be alarming in and of itself, and suggests that financial aid and state support for higher education may be falling short of making public higher education affordable and accessible to its residents. But, looking deeper, there is significant variation in student debt levels across the state between different higher education institutions.
In a forthcoming report, I find that unlike most other states in the country, Massachusetts four-year public college and university students are more likely to graduate with student debt than their counterparts at private schools. According to data from the Institute for College Access and Success, in 2013 74% of Massachusetts public four-year college and university graduates left with student debt, versus just 60% nationally. Only 61% of students at private non-profit institutions in Massachusetts graduated with student debt—a significantly lower proportion than at our public colleges and universities. This is especially important because 9 out of 10 in-state public college graduates stay in the Commonwealth after graduation, according to the Massachusetts Department of Higher Education.
However, I discovered that private institutions with higher proportions of in-state students tend to leave their students saddled with greater debt loads than their more competitive and prestigious counterparts. Similarly, these graduates will likely stay in Massachusetts after graduation.
The trends in student debt suggest that a large portion of debt accumulated by Massachusetts students will continue to impact our state economy in the long-term. In my report, I estimate the impact of these mounting debt loads to show the dollar value of forgone consumer spending and savings, as a result of this debt. In this analysis, I estimate that the 967,000 individuals with outstanding student debt in Massachusetts spend about $234 million each month on student loan payments alone. That means about $2.5 billion per year is forgone in consumer spending, savings, and investment each year! A whopping total, and a large drag on our state’s economy and students’ future prosperity.