Student Loans Are Poorly Aligned With Graduate Earnings

Student-loan payments are the bane of many new graduates. A recent analysis by the Brookings Institution explains why: The typical new graduate is likely to devote 14 percent of his or her paycheck to student loans. That’s about half of what the average American spends on housing each month.

It’s even worse for students who graduate with fine-arts or therapy degrees. They can expect to put more than 20 percent of their pretax income toward paying off student loans. Good news for nursing and engineering majors, though. They’ll need to dedicate less than 10 percent of their initial income to student loans.

Of course, over the typical 10-year repayment plan, those percentages should drop for most graduates. According to the Brookings analysis, the share of a typical graduate’s income devoted to student-loan payment drops to 6.5 percent a decade after graduating. <Read more.>

Via Lance Lambert, The Chronicle of Higher Education.

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