The Wall Street Journal recently introduced us to an orthodontist who had not yet repaid $1 million of his student debt…and probably never will.
You can see below that becoming a dentist is expensive:
Not quite typical, this orthodontist was one of 101 people whose outstanding federal student loan exceeds $1 million. At the $100,000 level, there are approximately 2.5 million individuals. As for the average, it is a more down-to-earth $17,000.
Should we be concerned?
These are some of the facts…
Below, the darkest states have the highest proportion of student loans:
You can see how the AAUW uses two graphs to connect the gender pay gap to the college loan problem:
So, should we worry?
Our Bottom Line: Economic Growth
In their “Feds Notes,” the Federal Reserve does not sound very concerned. Attributing the surge in loans to higher college enrollment and rising tuition, they don’t believe the debt will constrain the consumption that is close to 70% of the GDP. Furthermore, because 90% of outstanding student loan debt is guaranteed by the federal government, financial institutions are not “highly exposed.”
They do express concern that household spending could be crowded out by debt service but then conclude a minimal drag on GDP growth. Similarly, they point out that at risk borrowers could jeopardize other credit markets but again conclude the risk is not considerable.
Instead, the Fed reminds us that the loans are adding to the human capital that fuels consumption. And that returns us to our orthodontist who owns a $400,000 house, drives a Tesla, and earns more than $255,000 a year.
My sources and more: Having just seen a WSJ article about the largest loan careers, this Brookings commentary was especially relevant. From there, this CNN student loan discussion provided a new perspective as did the AAUW report. But if you want more data, Pew, the Urban Institute, these “Fed’s Notes,” and a 2018 Federal Reserve Report have it.
Please note that the numbers I use from WSJ differ slightly from a 2018 Federal Reserve Report.
Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.