The most incisive guide to issues facing the American family today . . . An invaluable resource for anyone wishing to stay on the cutting edge of research on family trends.
-W. Bradford Wilcox
Associate Professor of Sociology, University of Virginia
The Federal Guaranteed Student Loan program represents an almost pure example of the “law of unintended consequences” in public policy. Initiated in the mid-1970s as a modest supplement to means-tested federal (later, Pell) grants, it has grown into a massive program involving a majority of students at both the undergraduate and graduate levels. Supplemental private loans have multiplied the turn toward debt-funded higher education. According to the Nellie Mae Corporation’s most recent National Student Loan Survey, average undergraduate student loan debt in 2002 was $18,900, up 66 percent since 1997 (the median debt figure rose 74 percent from that latter year, to $16,500). Both figures are surely higher today. Students attending graduate schools reported an additional $31,700 in average debt, an increase of 51 percent since 1997. Graduates from professional schools, notably law and medicine, carried an average of $91,000 in accumulated total debt. Overall, an estimated $94.2 billion in federal assistance was given to students in the 2009–10 academic year, up from $40.2 billion in the 1999–2000 academic year.
Students graduating from colleges and universities during the last quarter century represent the first generation of Americans to finance a significant portion of their higher education through interest-bearing debt. Indeed, “they may be the most indebted generation of young Americans ever,” with the average indebted adult, ages 25 to 34, spending nearly 25 percent of income on debt service of all types. While referring to a related situation in New Zealand, a student-backed report captures a sentiment also growing in America:
The stories [told here] belie the government’s view that student debt will not impede borrowers’ lives. The fact is that ex-students are struggling financially and emotionally because they have mortgaged themselves for an education . . . that has created a “Debt Generation.”
The unanticipated consequences of this method for funding higher education become especially evident when considering its effects on family formation, notably marriage and childbearing. In cultures around the world and throughout recorded history, the common practice has been to use dowries (the property brought by young women into their marriages) and other marital gifts to provide newlyweds with working capital at the beginning of their marriage. This cultural strategy has aimed at encouraging marriage, stable homes, and the birth of children. Until the last few decades, no known society has ever launched large numbers of young adults on their life course carrying substantial debt. How is this peculiar experiment working out?
The anecdotal evidence is not encouraging. Dating behavior may be affected. One 31-year-old university instructor, bearing $100,000 in student loan debt, reports that when he begins dating a new woman, he “makes sure” to inform her up front of his financial situation. Predictably, this discourages second dates. Marriages are also delayed due to debt. A young woman in Cincinnati, now a publicist, expects to have her student loans paid off in two years. However, her boyfriend still owes $40,000 and “he doesn’t feel financially ready for marriage.” In addition, the inauguration of childbearing may be delayed. One popular website, www.pregnancyandbaby.com, counsels prospective parents that, before having a child, they “pay off any personal debt they have accumulated over the years—student loans, car loans and so on.”
On an empirical basis, relatively little is known. The evidence concerning the effect of any sort of debt on marriage, divorce, and fertility is meager. Some work suggests that there is no significant influence. Notably, a National Center for Education Statistics study of 1992–93 bachelor degree recipients found that about 50 percent of student loan borrowers “were married or cohabiting as married in 1997,” equal to the 50 percent of non-borrowers. (However, this conflation of married with cohabiting couples poses certain interpretive problems, as I will explain later). Other studies point to a negative correlation between financial stress and family formation and stability.
Education and Fertility
More illuminating are broader findings regarding the social forces affecting marriage and fertility. Many contemporary economic, ideological, and legal pressures discourage entry into marriage and the birth of children. A modern market economy, for example, reduces the “economic gain” formerly provided by spouse and offspring. It upends the natural complementarity of husband and wife on the small farm or in the artisan’s shop, and transforms children from little workers in the family enterprise into consumption items (economically speaking). Modern idea systems including liberalism, socialism, and feminism challenge the “status” presumptions found in the traditional legal constructs of “husband” and “wife.” Recent changes in the law, such as the introduction of no-fault divorce, have weakened the institutional nature of marriage.
All the same, one of the strongest correlations found in social science is the negative relationship between education and fertility. Simply put, the more education that individuals receive, the lower their predicted lifetime number of children. This correlation holds for elementary, secondary, and higher education levels and is found in all parts of the world. The exceptions to this “law of sociology” usually involve religious groups which show a positive relationship between higher education and fertility, albeit usually only for a decade or two. Examples include American Roman Catholics during the 1950–65 period and American Latter-day Saints, or Mormons, during the 1970s and 1980s. While the negative correlation between educational level and fertility exists among both sexes, its effects are usually stronger among women.
This pattern is more relevant now that women have replaced men in the United States (and in most other Western nations, as well) as the sex most likely to earn a bachelors’ degree. Other evidence shows growing educational homogamy, meaning that men and women are increasingly likely to marry someone at or very near their own educational level. This trend accelerates the retreat from marriage because as women increasingly dominate higher education, they find a shrinking pool of marriageable men. Even independent of debt, it seems, education serves as a growing obstacle to marriage as well as to children.
The demographic theories of Richard Easterlin also appear relevant. Attempting to explain both the baby boom (1945–64) and baby bust (1965–80), and ignoring the role of idea systems such as feminism, Easterlin emphasizes the relation between a couple’s “material aspirations” (which they develop while growing up) and its economic realities: “If the couple’s potential earning power is high in relation to aspirations, they will have an optimistic outlook and will feel freer to marry and have children. If their outlook is poor relative to aspirations, the couple will feel pessimistic and, consequently, will be hesitant to marry and have children.” Easterlin argues that “increasing economic stress”—not the birth control pill—was the cause of the baby bust. He adds that the unusually rapid rise since 1960 in the proportion of young women working outside the home “is chiefly due to the decline in the relative income of young couples.” Following dramatic gains during the 1950s, the rise in the real earnings of men slowed during the late 1960s and actually turned negative after 1970. In short, exceptionally low fertility occurs because “young persons are under much greater economic pressure.”
Australian sociologist Natalie Jackson provides a compelling effort to apply these existing theories to the new problem of student debt. Her nation’s student loan program, called the Higher Education Contribution Scheme or HECS, differs in some ways from the American plan. It provides an inflation-adjusted, income-contingent loan to college and university students; repayment begins when employment earnings reach a threshold ($21,984 in 1999), at a rate varying between 3 and 6 percent of the principal. Notably, no interest is charged. However, the probable impact on family formation mirrors the situation in the United States. While emphasizing the “lack of data” on the social effects of student debt, Jackson underscores the likelihood of “strong antinatalist elements.” After examining the Australian experience, her “case” concludes:
Preliminary Data: The Student Debt Burden
Beyond the theories of Jackson and Easterlin, polling data, reports, and a few studies suggest a connection between student debt and family formation. According to the most recent Nellie Mae National Student Loan Survey (conducted in 2002 and published the following year), 56 percent of all student borrowers report being “burdened” by their debt payments. A similar number indicates that, if they could begin again based on experience, they would borrow less. Among graduate students, 63 percent feel “very burdened” by their debt payments; among law and medical school graduates, 75 percent report the same feeling. Forty-two percent of borrowers in repayment for at least three years say they have experienced “more hardship than anticipated.”
Notably, family-related behaviors are affected. Fourteen percent of borrowers report that the “loans delayed marriage,” up from nine percent in 1987. Twenty-one percent report that they have “delayed having children because of student loan debt,” up from 12 percent in 1987. The two charts below reveal responses of borrowers over time and indicate greater delays in family behaviors among low-income borrowers, identified as those also receiving Pell Grants.
Alongside these numbers are reports implying negative family outcomes. Another study of Australian student borrowers suggests a delay in transition to adulthood, evidenced in a growing proportion of 20 to 29-year-olds still living in their parents’ homes: rising from 42 percent of persons 20 to 24-year-olds in 1986 to 47 percent in 1999; and from
Impact of Student Loan Debt on Family Formation
Percent of Borrowers
Percent of Borrowers by Loan Type, 2002
Source: Sandy Baum and Marie O’Malley, College on Credit: How Borrowers Perceive Their Education Debt. Results of the 2002 National Student Loan Survey (Washington: Nellie Mae Corp., 2003), pp. 27, 23.
12 percent to 17 percent among 25 to 29-year-olds. This conclusion parallels earlier work by American researchers that found that the probability of degree recipients still living with their parents was related to “age, income and debt burden.” Both younger and lower-income persons were more likely to be living with their parents, as were borrowers paying more than 15 percent of their monthly incomes for loan repayments. A generation ago, finding a full-time job, leaving one’s childhood home, marrying, purchasing a new home, and having children, marked the transition to adulthood. Increasingly, “the achievement of many of these markers is being delayed, or indeed, not reached at all,” with student loan debt a significant cause.
Empirical evidence also suggests that student loan debt encourages cohabitation at the expense of marriage. A study in the Journal of Marriage and Family examines factors affecting decisions regarding marriage by cohabitants from the working and lower middle classes. The researchers find that economic issues shape the decision whether or not to marry; specifically, “cohabitors believe marriage should occur once something has already changed—in this case, their financial status.” In-depth interviews with 115 cohabitants produced statements including:
“I’m still at a financially unstable point because of . . . school loans. And I don’t want to impose that upon anybody else. Like that’s one of my major things before I get married. I want to be paid up.” [Andy, a 26-year-old computer technician]
“[My girlfriend wants a] big 30, 40 thousand [dollar wedding] and I’m not quite ready for that . . . we need to get some more of my student loans paid off and stuff like that before I can even do that.” [Wesley, a 22-year-old factory supervisor]
The researchers conclude that cohabitants defer marriage until they meet a package of financial goals: “Most commonly, this economic package includes home ownership, getting out of debt, and financial stability (not living from paycheck to paycheck).” Their finding is echoed in a 2005 report prepared by the Rochester Institute of Technology, which indicates that nearly half of the young singles interviewed “indicate that their current debts will probably delay their plans to start a family.”
Even so, indebted young people do still marry. Indeed, 67 percent of women and 74 percent of men now enter marriage with at least some debt, ranging from credit cards and auto loans to student loans. Evidence that such debt burden influences the quality of marriage is growing. Based on a survey of 21,500 married couples with average ages of 35 for husbands and 32 for wives, David Olson found that 76 percent of “happy couples” agree with the statement: “Major debts are not a problem.” This compared to only 35 percent of “unhappy couples.” Viewed from another angle, 56 percent of the latter affirm: “Major debts are a problem for us.” Olson concludes: “Major debts are an issue for over half of married couples, and many couples have disagreements over who should control the money they have.”
Creighton University’s Center for Marriage and Family offers a broader and more convincing national study of the difficulties facing young married couples. It sampled 947 couples that participated in marriage-preparation classes between 1995 and 1999. The survey asked respondents to rate 42 issues that “might be problematic during the early years of marriage,” rating each issue at “the highest level it is or has been problematic within your marriage.” “Debt brought into marriage” was one of these, alongside others such as “balance job and family,” “constant bickering,” “communication with spouse,” “decision to have children,” “frequency of sexual relations,” “parents or in-laws,” and “use of emotional force.” Relative to debt, key findings are:
Student Debt and the Rise of Cohabitation
The effects of student debt on family life can be measured more concretely, albeit in admittedly tentative ways. As the evidence suggests, student loan debt contributes to a declining rate of marriage. While found at all age levels, the fall in the proportion of younger adults who are married is especially pronounced among women and men, ages 20 to 24, the group most affected by undergraduate student loan debt:
Percent of Women Married
Percent of Men Married
Percent Decline in Marriage Rates, 1980 to 2008
Source: Statistical Abstract of United States, 1981 edition, Table 49; 1986 edition, Table 45; 1990 edition, Table 49; 1993 edition, Table 61; 1998 edition, Table 62; 2002 edition, Table 48; 2006 edition, Table 51; and 2010 edition, Table 57.
Increase in Cohabiting Households, 1980 to 2008
Source: Statistical Abstract of the United States, 1998 edition, Table 60; 2002 edition, Table 49; 2008 edition, Table 62; and 2010 edition, Table 66.
Also in line with the qualitative evidence outlined above is the dramatic increase in cohabiting American adults, with debt being a leading suspect among possible contributing factors. Some express little concern over these numbers, viewing cohabitation as simply another form of “partnering,” largely equivalent to marriage. This optimistic view, however, flies in the face of mounting evidence regarding the distinctive problems of cohabiting relationships.
A 2000 study, for example, finds that “the odds of a recent infidelity were more than twice as high for cohabitors than for married persons.” Moreover, “living together before marriage raised the net odds of marital infidelity by 39%.” Relative to household stability, another study found that “cohabitors have rates of separation nearly five times as high as married couples” and that “once cohabiting couples separate, they are far less likely to reconcile.” Reflecting a similar fragility, a research team at the University of Denver in 2004 found a strikingly low level of commitment to each other among cohabitants, when compared to married couples. This lack of commitment even carried into subsequent marriage: husbands’ dedication to their wives and level of satisfaction in marriage were significantly lower if cohabitation had preceded the wedding. Research also confirms that “the risk of experiencing violence is higher for a woman . . . living in a de facto rather than a married relationship.” Indeed, 42 percent of cohabiting women report having experienced “severe violence” at the hands of a partner, compared to slightly over a quarter of married and single women (30 and 26 percent respectively).
These negative effects of cohabitation fall on the children as well. Sociologist Susan Brown reports that child well-being among “two-biological-parent cohabiting families” and “cohabiting stepfamilies” is no better than that found among “children in single-mother families.” Indeed, the children of cohabitation suffer from significantly elevated rates of emotional and behavioral disorders, when compared to children in married couple homes.
In addition to contributing to declining marriage rates, rising debt levels and financial stress, including student loans, also appears to contribute to declining birth rates among young Americans. A telling trend, illustrated by the two charts below, is the divergent fertility experience of women with bachelor degrees since 1984. Calculated from the data of the first chart, the ratio of birth rates among college-educated women, relative to all women, declined from .90 in 1984 to .69 in 1995, which represents a decline in the ratio of nearly one-fourth. Unfortunately, the U.S. Census Bureau stopped reporting the data used for both charts after 1997. Nonetheless, the charts suggest that a special anti-natalist force has been at work among the young college-educated. Among causes, the evidence points to student loan debt.
Those who crafted the federal loan program saw it as a way to stimulate investment in education, and so to improve what economists call “human capital”: the existence, skills, and knowledge of individuals. In practice, it may be contributing to the postponement of marriage and to the prevention of the birth of children. Serving, oddly and unintentionally, as a highly effective form of contraception targeted on the college-educated, student loans may actually keep stable homes and new “human capital” (e.g., babies) from forming.
Impact of College Education on Birth Rates
Percent Decline in Birth Rates, 1984 to 1995
Source: Statistical Abstract of the United States, 1986 edition, Table 91; 1990 edition, Table 93; 1993 edition, Table 104; and 1997 edition, Table 103.
The Complicity of the Academy
These negative trends in the private lives of indebted former students point to another aspect of the problem: the way in which college and university administrators have used revenues from loans to avoid fiscal responsibility over the last thirty years. In 1975, revenue generated from student loans formed less than three percent of all college and university revenues. Today, this revenue stream constitutes about 20 percent of all income. During the same three decades, the average undergraduate costs for full-time students (tuition and fees and room and board) in degree-granting institutions (public and private) more than doubled after controlling for inflation, rising from $8,963 to $18,471 between the academic years 1976–77 and 2006–07.
Add these figures together and the reality becomes clear: college and university administrators have relied on this grand new revenue stream to avoid fiscal discipline and to increase expenditures for administrative and faculty salaries and other niceties. In an operational sense, student loans have proved to be an almost magical money source much like a special line of credit, where the revenues have flowed directly into each school’s bank account; while repayment becomes the problem of hapless future graduates. The temptation to join in had to be irresistible. If the system had worked as promised, as a way of enhancing “human capital,” all would be well. In practice, though, college and university administrators share responsibility with federal legislators and regulators for the familial problems that have emerged.
Over the last several years, a few schools have seen the light. Endowment-rich institutions such as Harvard and Stanford Universities have announced an end to the use of student loans. A handful of small places operate their own loan programs with more flexible terms.
Responding to criticisms raised by the Pew Foundation-funded “Partnership to Reduce the Burden of Student Debt,” the U.S. Department of Education introduced an Income-Based Repayment Plan for student borrowers in 2009. For single borrowers earning under $50,000, or a married couple making under $100,000, the new plan would cap payments on federal student loans at 15 percent of the difference between their Adjusted Gross Income and 150 percent of the poverty guidelines of the Department of Health and Human Services; leaving a net maximum monthly payment of about 10 percent. Also on the positive side, the regulations provide some specific relief for debtors with dependent children, adjusting the monthly payment according to family size: For example, the maximum monthly payment for a single person earning $50,000 per year would be $422; coming from a family of five, $141. Yet remaining debt would be forgiven only after 25 years as the former students approach or enter their 50s. This mechanism is only available for the repayment of certain forms of federal loans; the burden of private loans is unaffected.
A Way Forward
While the new repayment plan set up by the Education Department is a step in the right direction, American policymakers need to consider better approaches and solutions. To begin with, the time has come to reconsider the implicit national policy of sending as many young people as possible to college. Too many young adults hold degrees with little prospect of finding gainful employment. This policy has also contributed to the broad decline in academic standards and the transformation of many universities into expensive trade schools. For many skills, a return to apprenticeship programs, which avoid loans and actually provide a modest wage, would be a better approach.
Policymakers need also acknowledge that other contemporary social forces in America—not just student loan debt—discourage marriage and fertility, ranging from the incentives of a mature market economy to idea systems such as neo-Malthusianism, which frown on early marriage and relatively large families. In some cases, government policy can or should do little about these pressures. However, the anti-marriage and anti-natal effects of student loan debt are the consequence of poorly conceived public policy. Accordingly, policymakers face a special moral imperative here to set things right.
Many additional ideas have been advanced to reduce the problems: improved debt counseling and life-planning education among student recipients; the phasing out of student loans in favor of enhanced Pell grants; tax reforms that would make all educational expenses (including payments on debt principal and interest) tax deductible as investments in human capital; eliminating interest payments on loans (as in Australia); and—as recommended by President Barack Obama during his campaign—granting relief from student loan principal to young adults who perform public service, as already done for volunteering for military duty or for medical service in poverty-stricken areas.
Arguments for and against can be made regarding each proposal. Abolishing the program would, in the long run, solve the familial contradiction, at the price of short-term hardship and admission declines at colleges and universities. This seems politically unlikely. So does a vast expansion of Pell grants, due to prohibitive costs. Expanding debt forgiveness in exchange for other forms of public service—such as teaching or lawyering in depressed areas—holds promise. Yet, like the other ideas noted, it largely sidesteps the inherent family problems. To address the retreat among college-educated young people from family behaviors, a more direct option is needed, such as:
For every new child born to (or adopted by) indebted married parents, the federal government would pay off one-fourth of their outstanding student debt, up to $5,000 each for mother and father (a figure that would be indexed to the Consumer Price Index).
This would mean that four children born to a couple could erase as much as $20,000 per parent. This measure expands on the concept of debt relief in exchange for responsible public service. It would treat marriage and marital childbearing as public goods. It would recognize, in the words of Theodore Roosevelt, that: “It is in the life of the family, upon which in the last analysis the whole welfare of the nation rests. . . . The nation is nothing but the aggregate of the families within its borders.” It would also be in the spirit of Molly Dewson, a Democratic architect of Social Security and the New Deal, who declared in 1939:
When you begin to help the family to attain some security you are at the same time beginning to erect a National structure for the same purpose. Through the well-being of the family, we create the well-being of the Nation. Through our constructive contributions to the one, we help the other to flourish.
This proposal would immediately remove the policy-created disincentives toward marriage and childbearing that young graduates now face, creating modest incentives in their place. The birth of four children over the space of six to eight years could eliminate total family debt of up to $40,000. At the same time, this plan would be far more cost effective than universal Pell grants. Why? It is highly unlikely that all indebted college graduates would have the four children needed to gain the full relief. Moreover, the cap on the maximum amount would mean that over half of graduates would still repay a significant share of their obligation, even if they brought four children into the world. Finally, using the overall inflation rate as an index, rather than inflation in education costs alone, would dramatically constrain projected costs.
The proposal has several international precedents. Germany, for example, forgives up to 1,256 Euros per year if the student borrower is caring for a child under the age of ten. A few years ago, Parti Québécois leader Bernard Landry proposed writing off half of the student loans of Quebec University graduates if they had a child within five years of gaining their degrees. He explained: “A vote for the Parti Québécois is a vote to make Quebec younger.”
Answering Possible Objections
Why favor marriage? The state has a compelling public interest in the marriage of young adults. Marriage has beneficial social and health effects for both the married and their children, and these gifts also benefit immediate communities and all of society. Both married men and women are, on average, more productive, wealthier, healthier, happier, and much more engaged as citizens than the unmarried. Moreover, children growing up in married couple households are also significantly healthier, safer, and happier, and more likely to succeed in life, than children growing up in any other circumstance. This would mean that American society would predictably have fewer children in foster care, less poverty, crime and drug abuse, and lower healthcare costs. These public gifts from marriage would translate into higher government revenues, lower government expenses, more citizen engagement, and a more stable public order.
What about young adults who cannot biologically create children? The same debt forgiveness would be accorded to those married couples that adopt a child.
Why create an incentive for more births? In 2007, the total fertility rate in the United States was just slightly above replacement level of an average 2.123 births per woman. Existing federal policy measures such as the income tax and the Social Security system already contain, again unintentionally, incentives hostile to marriage and childrearing. This modest countermeasure to temper these policies discouraging family formation would support the birth of new human life only within married-couple homes, where the life prospects for children are predictably the best. Moreover, the average American life, circa 2008, generates about $2.9 million in personal income over the course of his or her existence; for the children of college graduates, that figure rises to $4.6 million. Even if we deduct a third of that to cover the cost of each person’s public education and possible public care (which is probably too high), the net gain is clear. These children would stimulate economic demand, expand the labor supply, and generate extra tax revenues for government of about $1.84 per person over a lifetime. A modest federal investment of up to $10,000 in parental debt relief at the start of a new life would be a good public investment.
Will this discourage young people from minimizing their debt and working hard to pay off their loans? Probably not, since most former students would not have four children and would therefore still be responsible for a good share of their debt. Also, students have demonstrated fiscal responsibility by working during college: 74 percent of full-time students work while attending school and 46 percent of these students work 25 or more hours per week, often to the detriment of their grades.
Would this plan be too expensive? Once up and running, the annual cost to the federal government of forgiven debt would be between $8 and $10 billion, less than one fifth the cost of a universal “Pell grant” program.
Inaugurated as a modest supplement to grants, scholarships, and other “discounts” against tuition, the student loan system—public and private—has distorted the life choices of young Americans, allowed college and university administrators to escape fiscal discipline, and contributed to America’s notorious Culture of Debt. Instead of being—as promised—vehicles of investment in human capital, student loans have left too many young Americans in a form of bondage, or financial servitude. The loan system has also contributed indirectly to the over-expansion of American higher education and the broad decay of academic standards. Reform is overdue. Expanding debt relief that is tied to the birth of children among married couples offers the most promising approach. The alternative will be a continued crisis in educational funding, a growing burden of debt, and the accelerated shriveling of family life among America’s young adults.
Dr. Carlson is president of the Howard Center for Family, Religion & Society in Rockford, Illinois, and the distinguished visiting professor of political science and history at Hillsdale College in Michigan. Adapted from a lecture delivered December 4, 2009, at the Family Research Council, Washington, D.C., this essay updates Dr. Carlson’s essay, “‘Anti-Dowry’? The Effects of Student Loan Debt on Marriage and Childbearing,” that appeared in the December 2005 issue of The Family in America. Initial research for this paper enjoyed the support of the Partnership to Reduce the Burden of Student Debt, a project funded by the Pew Charitable Trusts.