Using Survey Data

A second group of studies turned to survey data that measured the individual circumstances of particular borrowers. One way to measure hardship in the survey data is simply to ask borrowers if they are experiencing financial hardship as they repay their loans.
For example, Baum and I surveyed about 2,000 American student loan borrowers who were in the repayment phase and whose loans were guaranteed by the Massachusetts Higher Education Assistance Corporation. Our analysis was specifically aimed at investigating “the extent to which educational debt is burdensome for borrowers .Baum and I asked several questions designed to elicit respondents’ subjective impressions of the burden of loan repayment. We summarized the results of those questions as follows: “Based on the responses, we estimate that approximately 30% [of the respondents] perceive significant hardship resulting from their loan repayment. About one-half of the respondents do not perceive measurable hardship.” In the Canadian context, Ross Finnie and I used the NGS data to analyze the burden of student loan repayment for Canadian borrowers who had graduated from a post-secondary institution.19 The NGS asked graduates who had student loans outstanding whether they felt that repaying their student loans was a hardship. According to Finnie and I, 19 per cent of the male graduates and 26 per cent of the female
graduates reported hardship.Since 65 per cent of the survey respondents did not have any outstanding student loan debt, Finnie and I suggest that, for those graduating from post-secondary institutions in the 1980s, student loan repayment was a problem for only about 7-8 per cent of the borrowers: see Student Loans in Canada, supra note 19 at 47.
Finnie and I also used the NGS data to examine the ratio of total student debt to earnings.Ideally, one would compare the flow of payments to the flow of income. The NGS, however, contains only the total amount borrowed by each respondent and not their monthly repayments. This ratio understated the true debt burden facing the graduates for at least two reasons. First, debts other than student loans were omitted (since they were not reported in the NGS). Second, those who were not working were omitted (since they had no earnings and, thus, had an undefined ratio of debt to earnings). For those who received bachelor’s degrees in 1990, the median debt-to-earnings ratio was 0.28 for men and 0.32 for women. The ratios for other
degree types and other cohorts were somewhat lower. As a rough indicator of the substantive magnitude of Finnie’s and my ratios, note that Sullivan, Warren and Westbrook estimated that the median ratio of “total non-mortgage debt to income” for their sample of American bankrupts was 0.7.See As We Forgive Our Debto,r ssupra note 13 at 206. In this calculation, only debtors who were not self-employed and who were filing under Chapter 7 were included. The burden of student loans, however, is probably lower than the burden of an equivalent amount of “non-mortgage debt” because student loans are paid off over ten years
(rather than the two or three years that is typical of non-mortgage debt)
and, thus, requires smaller monthly payments.The literature on bankruptcy generally suggests (though without much theoretical or empirical support) that a debt-to-earnings ratio of one (that is, a debt load equal to one year’s earnings) indicates that bankrupts “cannot pay” their debts. Another potential impact of a debt burden that is too heavy would be the inability of former students to participate fully in life after leaving school. Some have argued that if students face too high a debt load upon leaving school, they will be forced to forego careers that are not remunerative, to postpone marriage, to postpone having children, or, in general, to be unable to participate fully in adult life. Baum and I also asked our survey respondents if their loan repayment obligations had affected home-ownership, car ownership, or living apart from parents. At least in the United States, in 1988 (when average total student loan debts were between US$6,000 and US$9,000), repayment did not have any “significant impact on the actual consumption patterns of borrowers.
” Baum and I concluded that “[t]he evidence strongly suggests ... that the loan payments are not significantly affecting the ability of repayers to enjoy the consumption patterns typical of similar borrowers without high loan payments.”Borrowing levels in Canada and in the United States continue to increase, and debt burdens continue to grow beyond the levels at which either borrowers or analysts have any experience. Despite long-standing and continuing concern about excessive debt burdens, students have continued to borrow. Thus, any dire predictions of the consequences ofincreased borrowing should at least be leavened with the knowledge that past fears have not been realized.

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