Students from Middle Income Families Rack Up More Education Debt

Middle Income Student Loans

Given the high cost of tuition, room and board, it’s not easy for families to pull together the funds to send their kids away to college, no matter how much money they make. But it would be easy to assume that this cost is toughest for low-income families, right?

Not exactly.

According to a study from the University of Wisconsin-Madison, student loan debt is actually most common among young adults from middle-income families. Jason Houle, the author of the 2012 study, points out that these families are stuck in what he calls the “middle income squeeze.” While they make too much for their children to qualify for student aid packages, they still don’t have enough income or savings to cover the high cost of college plus books, room, board and other associated costs.

Middle-Income Students Incur More Debt Than Lower-Income Students

Figures from the study show that students from families who earned between $40,000 and $59,000 annually left school with over $6,000 more in student loan debt than their lower-income peers whose families made less than $40,000 per year.

The same goes for the next tier of middle-income families. Students from families who earned $60,000-$99,000 annually left school with $4,000 more in student loan debt than those whose families earned less than $40,000 per year

Grants Go To Students with Lower-Income Background

Houle’s study found that over 90% of all Pell Grant recipients come from families with annual incomes of less than $40,000. That leaves just 10% of these federal grants (which don’t have to be repaid) for students coming from families that make anything over $40,000.

Fortunately, Pell Grants aren’t the only form of financial aid out there. In fact, the average American family says that 29% of their child’s tuition comes directly from grants and scholarships – it’s just a matter of getting out there and finding those opportunities. Check out this financial aid guide to figure out which alternative forms of financial aid your child may qualify for.

Middle-Income Students Incur More Debt Than Higher-Income Students

These statistics should come as no surprise. Young adults from higher-income families incur significantly less education-related debt than those raised in middle-income families. Figures from the study show that students whose families earned $40,000 to $59,000 annually racked up over $12,000 more in student debt than their peers whose families earned between $100,000 and $149,000 per year, and over $17,000 more than those with families earning more than $150,000 annually.

This trend holds true for students from the next tier of middle-income families. Students whose families earned between $60,000 and $99,000 incurred an average of $10,000 more in debt than young adults whose families made between $100,000 and $149,000 and $15,000 more than young adults whose families earned over $150,000 annually

Worried about pulling together the funds to send your child to college? There are plenty of tools out there that will help get an early start on your child’s college fund.

 

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