Rich People Have Debt, Too

With the cost of college rising every year, students are taking out higher and higher loans to pay for college. This results in stories about first generation college students working dead-end jobs carrying $100,000 worth of debt, even if that’s sort of uncommon. What is becoming more common, however, is debt itself.

Now everyone, rich or poor, is in the hole. According to a piece in today’s Wall Street Journal, even relatively affluent people are now going into debt to go to college.

As an article by Ruth Simon and Rob Barry explains:

Households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010, the latest figures available. That group also saw a sharp climb in the amount of debt owed on average.

The Journal’s analysis defined upper-middle-income households as those with annual incomes between the 80th and 95th percentiles of all households nationwide. Among this group, 25.6% had student-loan debt in 2010, up from 19.5% in 2007. For all households, the portion with student loan debt rose to 19.1% in 2010 from 15.2% in 2007.

And they owe a lot more, too. Upper middle class families now owe an average $32,869 upon graduation. The average was $26,639 in 2007, adjusted for inflation.

Why the increase? Part of the reason is that college is more expensive. Another reason for the higher debt, however, is that colleges are now less generous with financial aid. One of the most important reasons for this increase, however, has to do with families own finances. They simply have less money available to pay for college now. This means they’re more likely to need loans to cover the cost.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer