Make us your home page
Instagram

$1 trillion student loan debt widens U.S. wealth gap

Dr. Nida Degesys of Sterling, Va., graduated in May 2013 with about $180,000 in loans. Like the roughly 37 million others in the U.S. saddled with a total of $1 trillion in student debt, she may never catch up with peers who graduated free from the burden.

Associated Press

Dr. Nida Degesys of Sterling, Va., graduated in May 2013 with about $180,000 in loans. Like the roughly 37 million others in the U.S. saddled with a total of $1 trillion in student debt, she may never catch up with peers who graduated free from the burden.

Every month that Gregory Zbylut pays $1,300 toward his law school loans is another month of not qualifying for a decent mortgage.

Every payment toward their student loans is $900 Dr. Nida Degesys and her husband aren't putting in their retirement savings account.

They believe they'll eventually climb from debt and begin using their earnings to build assets rather than to fill holes. But, like the roughly 37 million others in the U.S. saddled with a total of $1 trillion in student debt, they may never catch up with wealthy peers who began life after college free from the burden.

The disparity, experts say, is contributing to the widening of the gap between rich and everyone else in the country.

"If you graduate with a B.A. or doctorate and you get the same job at the same place, you make the same amount of money," said William Elliott III, director of the Assets and Education Initiative at the University of Kansas. "But that money will actually mean less to you in the sense of accumulating assets in the long term."

Allen Aston is one of the lucky ones, having landed a full academic and financial-needs scholarship at Ohio State University. The 22-year-old software engineer from Columbus estimates it let him avoid about $100,000 in debt. Without loans to repay, Aston is already contributing 6 percent of his salary to a retirement fund that is matched in part by his employer and doesn't have the same financial concerns his friends do.

"I'm making the same money as them, but they have student loans they're paying back that I don't," he said.

At the other end of the spectrum is Zbylut, an accountant-turned-attorney in Glendale, Calif. He's been chipping away at nearly $160,000 in student debt since graduating in 2005 from law school at Loyola University in Chicago. Now 48, the tax attorney estimates he could have $150,000 to $200,000 in a 401(k) had the money he's paid toward loans gone there. He's been turned down twice for the type of mortgage he needs to buy a home big enough for himself, the fiancee he would have married already if not for his debts and her 10-year-old son. "I have more education and more degrees than my father, as does she than her parents, and yet our parents are better off than we are," he said.

Of the nearly 20 million Americans who attend college each year, about 12 million borrow, according to the Almanac of Higher Education. Estimates show that the average four-year graduate accumulates $26,000 to $29,000 in loans.

The increases have been driven in part by rising tuition, resulting from reduced state funding and costlier campus facilities and amenities. Compounding the problem has been a trend toward merit-based, rather than need-based, grants as institutions seek to attract the higher-achieving students who will boost their standings. Targeting the soaring cost of higher education, President Barack Obama in August proposed the most sweeping changes to the federal student aid program in decades. His plan would link federal money to new college ratings and reward schools if they help low-income students, keep costs low and have large numbers of students earn degrees.

$42,800

Median net worth in 2009 for a household with outstanding student loan debt.

$117,700

Median net worth for a household without student debt.

40%

Percentage of households led by someone 35 or younger that have student loan debt, according to a 2012 Pew Research Center analysis of government data.

$1 trillion student loan debt widens U.S. wealth gap 03/27/14 [Last modified: Thursday, March 27, 2014 7:36pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Airbag maker Takata bankruptcy filing expected in Japan, U.S.

    Corporate

    DETROIT — Japanese airbag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators.

  2. Federal agencies demand records from SeaWorld theme park

    Tourism

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  3. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  4. Line of moms welcome Once Upon A Child to Carrollwood

    Business

    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  5. Pastries N Chaat brings North India cuisine to North Tampa

    Business

    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.