Young Student Debtors Lag Behind in Accumulation of Wealth

Young borrowers saddled with student loans have a median net worth that’s typically seven times lower than their peers without college debt, according to a report.

The median college-educated student debtor has loans equal to about two years’ worth of household income, according to an analysis of the Survey of Consumer Finances by the Pew Research Center in Washington.

The study is the second in two days to show that young Americans with student debt are diverging economically from their peers who aren’t burdened with college loans. The Federal Reserve Bank of New York showed in a report yesterday that student debtors are retreating from the mortgage market. Outstanding education loans exceed $1 trillion, more than credit card debt, and are weighing down the U.S. economy.

“These young adults are lagging in building assets,” Richard Fry, the report’s lead author, said in an interview. “We’re not saying college was a bust for them. In building their nest egg, they’re significantly behind.”

The survey, conducted in 2010, defines young households as those under 40. Households headed by a young college-educated adult without education loans had a median net worth of $64,700 compared with $8,700 for households headed by a young college-educated adult who is paying loans.

Another reason those with student debt are accumulating less money may be because they are more likely to have car and credit card debt, according to the report.

The Survey of Consumer Finances, sponsored by the Federal Reserve Board of Governors and U.S. Treasury, has been conducted every three years since 1983.

To contact the reporter on this story: Janet Lorin in New York at jlorin@bloomberg.net

To contact the editors responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net Chris Staiti

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