I did a radio show with Steve Scher this afternoon on student loans. (I started off a bit rocky, but eventually recovered). While preparing for it, I accidentally came up with an estimate of the yearly shadow debt of college. My back of the envelope calculations indicate that in total (standard debt plus shadow debt), Americans borrow about 126 billion dollars a year for college.
Federal Loans account for 84b.
Private and State Loans account for another 12b.
The Shadow Debt accounts for the rest, about 30b. It is composed of
- Non-official student loans ~ 7.4b
- Credit Cards (student) ~ 1.9b
- Credit Cards (parent) ~ 5.5b
- Home equity or line of credit ~ 8b
- Retirement Acct ~ 3.3b
- Other parent loans ~ 3.6b
The Federal Loan and Private and State Loan numbers come straight from the College Board (table 1).
The interesting part is the shadow debt calculations. Sallie Mae’s How America Pays for College includes a table indicating the amount borrowed from various sources (table 2a). Unfortunately, this is an average per borrower. So to get an aggregate figure, I needed to multiply by the number of borrowers. To find that, I took the total number of students from the Digest of Education Statistics (table 187) and multiplied by the % of students borrowing according to finaid.org (first table at the link). These are the first 2 red numbers.
Since there was some overlap between Sallie Mae and the College Board figures, I was able to find PLUS and Private Loan amounts under both methods. It turns out that Sallie Mae’s figures are off by a factor of about 1.6 for those 2 categories. Assuming that they are off by a similar amount in the other categories, multiplying the Sallie Mae aggregate figure by 1.6 (the third red number) gives us calibrated figures that are comparable to the College Board figures. Adding it all up gives us 126b.
For those interested in playing around with the numbers, send me an email at gillenandrew at gmail and I’ll send you the excel file.