Student loan jubilee won’t boost family formation
Those concerned about the state of higher education tend to cite awake students and campus controversies, but others have pointed to another long-term problem: rising student loan debt. allegedly prevent young adults from marrying and starting a family. âYou shouldn’t have to go into debt and get a four-year degree that you don’t want to get a good job,â said Senator Josh Hawley. Declan Leary from The American Conservative argued last November that Conservatives concerned about low birth rates should recognize that “for college graduates the most obvious route is to tackle student debt.”
But crushing student loan debts don’t necessarily make young adults give up on forming a family. A report I wrote as a member of the Congressional Joint Economic Committee, first released earlier this month, assesses the evidence regarding family formation and the growing cost of attending college. The bottom line: student debt is not the albatross around the neck of the bride and groom as is often claimed. This is not to say that it is not a problem for some. Improving repayment options for people in difficult circumstances, while holding the line against radical debt cancellation proposed by progressives, is a better approach.
The decline in fertility and the increase in student debt are not myths. Marriage and fertility rates are steadily declining, reaching record highs even before the pandemic year of 2020. At the same time, the share of young adults attending university peaked at the start of this decade, and these students relied on students more than ever. ready. In my article, I see that the percentage of all households with unpaid student debt has increased from 8.9% in 1989 to 21.4% in 2019.
Media reports often link debt and fertility trends together. A the Wall Street newspaper reporter spoke to a Chicago woman who graduated from a for-profit interior design school with six figures in debt. The graduate wondered aloud, “How could I imagine having children if I can barely support myself?” “
Yet the decline in marriage and fertility rates is happening across the board, while the burden of student loans is less widespread. The Federal Reserve finds that 70 percent of all American adults, including 57 percent of those who attended college, have never incurred education-related debt. According to Beth Akers of the American Enterprise Institute, two-thirds of millennials have no student debt. A Brookings Institution report by Adam Looney and Constantine Yannelis argues that if there is “a crisis, it is concentrated among borrowers who have attended for-profit schools and, to a lesser extent, 2-year-old institutions. and some other non-selective establishments â- not those with six-figure balances from the elite programs that receive the most media attention.
My report, analyzing data from the Survey of Consumer Finances, finds that the average household student loan balance tends to be inflated by large outliers. Examining the median of the data, rather than the simple mathematical average, shows a much more gradual increase in the burden of student loans. Most of the observable effects on marriage and fertility come from people who choose to pursue higher education.
While debt and default rates may not be at the crisis levels touted by progressives, the timing of student indebtedness may deserve special attention. The peak of the student loan repayment period coincides with the early years of family formation. While evidence suggests that some people with unusually high loan burdens, especially women, are more likely to delay marriage, overall student loans are less associated with lower fertility. And overall, a heavy debt burden is borne by a small subset of households, many of which have a higher level of education and higher income potential.
My research focuses on the face value of student loans, not the larger question of whether going to college prompts someone to start a serious relationship, get married, or have a child. University graduates tend to marry later in life than non-students, although they marry at higher rates and have lower rates of non-marital procreation. The type of person who voluntarily spends several years of their life pursuing a doctorate. may have already been willing to give up a family in pursuit of professional success. Even though college loans themselves do not directly hinder family formation, an excessive cultural emphasis on formal education can encourage a mindset that puts marriage and parenthood on the back burner.
But on the fringes, public policy can reward or punish individuals who marry. The tax code’s treatment of the deduction of interest on student loans constitutes a marriage penalty. Currently, married spouses who file jointly can deduct $ 2,500 in interest payments on student loans, the same amount as an individual. Raising this limit to $ 5,000 – the same that both spouses would have obtained if they had remained single – would be a simple solution. The lifelong learning credit, which allows taxpayers to deduct eligible education expenses, has the same problem. Improving the mismanaged civil service loan forgiveness program (which the Biden administration has taken steps to do) or introducing a spousal income reserve into debt-driven repayment programs income could further expand options for future spouses or parents.
No one wants young adults to be crushed by student loans. Supporting community colleges, trade schools and non-traditional pathways to the job market, as well as encouraging more competition in higher education, would help more young people expand their options without relying too much on debt. But sweeping loan cancellation proposals such as those put forward by leading progressives would do nothing to improve higher education performance in the future. And the evidence suggests that these policies would also do little to increase rates of family formation.
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