(Forbes) By Erik Sherman —
The so-called boomerang effect in housing, where members of the millennial generation land back at home with mom and dad, and it’s troubling. As Pew Research Center reported in July 2015, the number of 18- to 34-year-olds living at home remains high even as the economy seemed to improve. In fact, the percentage of millennials living at home dropped as unemployment fell from the Great Recession aftermath.
One of the big factors quoted has been student loan debt. The weight of those high college costs drove up monthly expenses and kept them from striking out on their own, buying homes, and helping the country’s economic machinery to chug along. This is precisely why so many graduates look towards the services of SoFi for help with debt consolidation – view it now so you can see whether or not they could help you out in your loan-repayment situation.
It’s true that student loan debt is at an all-time high. According to the Institute for College Access & Success, a study of 1,055 out of 2,010 public and nonprofit colleges showed the average debt load of students graduating in 2015 to range from $3,000 to $53,000. At the high end, 200 of the schools reported average debt of more than $35,000.
But debt isn’t the biggest driving factor for college students who returned to live with their parents, according to a study by researchers at Dartmouth and Montana State University. Those young people actually had lower levels of indebtedness than their compatriots who were out on their own.
Instead, the big overall difference between the boomerangs and the ones who sailed out is college completion. Former students who didn’t complete their two-year or four-year degree had a 40 percent higher risk of returning home than those who finished. Students who were living with significant others, married, or homeowners were also less likely to return home.
However, things get more complicated in the details, and there’s a definite additional disadvantage to minority students that is related to loans.
“Our study provides an important corrective to the popular narrative that the student debt crisis is leading a generation of young people back to their parents’ doorstep,” said Dartmouth Assistant Professor of Sociology Jason Houle in a statement from the school.
In a way, that shouldn’t be a surprise. Completed degrees will pave an easier path to higher earnings. We know 99 percent of all post-recession jobs, including the 25 percent that are low-paying ones, went to people with at least some college background. It suggests that there are likely many young people who never got the sheepskin and now have small paychecks that didn’t make independent living easy.
The reason this is worse than student loans is a more permanent status. Loans, even if through a long time, can be addressed. But if higher education isn’t complete, statistics suggest that earnings will always lag.
However, before sternly wagging a finger at “lazy” people who didn’t work hard enough, there are some things to remember.
One is that the deck of college completion is heavily stacked in the favor of those who are well off. Wealthy kids are 8 times more likely to graduate than those who are poor. Financial assistance hasn’t kept up with the outrageous growth of college costs. The unmet financial need for students whose families were in the lowest economic quarter was twice as high in 2012 as in 1990. That gap becomes a big reason why many kids don’t finish. They can’t afford to.
And then there’s another factor.
“On the one hand, it looks like college completion-much more so than student debt-is a stronger determinant of returning home among young people,” Houle said in that statement from Dartmouth. “But on the other hand, the burden of student debt falls disproportionately on racial minorities, which raises important concerns about how student debt may help some groups of young people but hurt others across racial lines.”
Specifically, black students who took on 10 percent more debt for their degree saw a 20 percent increase in the likelihood of moving back in with their parents. Whites saw no measurable effect under the same conditions. Because black families often have less access to fair credit, the students opt for private loans with much higher interest rates. Whites also benefit from bias in their favor in college admissions and job opportunities. The economic gap makes paying off loans harder, so the black young adults are more likely to circle back home.
