Student Debt Isn't Just For College Kids Anymore

Student debt among middle-aged Americans grew by nearly half in the past three years. Thank the awful job market.

Reuters

We're all used to hearing horror stories about the knee-buckling student debt burden weighing down today's college graduates. The average student who takes out loans to finance their education leaves school $25,000 in the hole.

But, as Reuters reported yesterday, it turns out that student debt may not be rising fastest among the young. Instead, middle aged Americans are leading the surge. Per the news service:

Educational borrowing is up for every age group over the past three years, but it has grown far more quickly among those between 35 and 49, according to the analysis of more than 3 million credit reports provided to Reuters by the credit score tracking site CreditKarma (CreditKarma.com). That group saw its school debt burden increase by a staggering 47 percent, according to the analysis.

The average student loan debt for those aged 38 to 41 was the biggest of that group -- about $12,000, up from just under $9,000 in 2009. Young people still carry the biggest student loan burdens; those aged 26 to 29 have an average of $14,000 in student debt. But the increased levels in middle-aged student debt is a new phenomenon.

What's causing older Americans to pile on loans? The terrible job market, of course. CreditKarma's CEO claims workers reeling from the bad economy are paying up for job training and advanced in the hope of improving their chances of getting re-hired.

It's a discomfiting trend. Going into debt in order to pay for a degree is a worse value proposition for a 36-year-old, or (god forbid) a 49-year-old, than someone in their early twenties. There's simply less time to earn back the money spent on that education, which limits its potential return. The fact that enough older students are still willing to go into hock for a new set of skills is a sign of just how desperate times have become.

Is it better than sitting at home, sending out more resumes into the ether? Possibly. If a worker's skill set is outdated, and it's unlikely they'll be picked up by a new employer, then going to school is probably the closest they'll get to an escape hatch. Plus there's no opportunity cost, since nobody is paying them anyway, and taking classes gives them a new resume line.

Some resume lines, though, are more valuable than others. Unfortunately, the Reuters piece doesn't go into deep detail about the kinds of training middle-aged adults are seeking. But it does point to for-profit universities, the fastest growing sector of higher education during the past decade, as one of the forces driving the increase in debt. That's worrisome. For-profit schools are notorious for their abysmal graduation rates. Their students take out more debt than students at non-profit schools. And in 2009, their attendees accounted for 44% of all student loan defaults. For the minority who do graduate, the schools often claim job-placement rates around 70%, though some of those numbers have also come under serious scrutiny, or proven to be outright false. Bottom line: for most students who enroll, they're not a ticket to employment. 

Americans are willing to take an expensive bet in order to get a job. And for a lot of them, that risk won't pay off.