Published on May 1, 2023

Making Student Debt Manageable

Undergraduate debt must be manageable for students to maximize the value of the credentials they earn. Reaching our goal for student debt starts with acknowledging the disparities among different students.

Our goal for Building a Talent Strong Texas

  • 95% of students graduate with no undergraduate student debt or manageable levels of debt in relation to their potential earnings.

A credential’s value is tied to debt and earnings

Texas is the first state to condition its completion goals directly to the wages associated with postsecondary credentials. We’re doing this because, although attaining a credential is an important indicator for success, we want to know the true financial costs and benefits of credentials in our state. That is to say, we want to know whether a student graduating with a postsecondary credential truly earns more as a result of holding that credential than it cost them to attain it.  

Tracking student debt and earnings is a critical part of this effort. It’s particularly relevant as we aim to boost the economic mobility of historically underserved populations. These students tend to have the greatest financial need and encounter the most obstacles when it comes to enrollment and completion. 

For this goal, we’re tracking debt across all credentials earned at public institutions statewide as well as breaking it down across demographic groups. These groups include gender, race and ethnicity, and whether students received financial aid through Pell Grants. We’re tracking earnings five years after completion using state wage data. 

What is “manageable” debt?

For this goal, we define manageable debt as a debt-to-income ratio below 10%. In other words, a student’s total monthly loan payments should be less than 10% of their projected earnings five years after completion.

Debt is manageable overall but not for every group.

At the statewide level, we see that we are close to reaching our goal of 95% of students graduating with manageable debt or no debt at all. This is a strong sign that graduates in Texas are on a path to financial success.

When examining debt by student demographics, however, we see a different picture. Less than 95% of White students and African American/Black students have manageable levels of debt. African American students across genders, are uniquely burdened, having the smallest share with no debt and the largest share with high debt compared to other groups. 

Most students graduating with undergraduate degrees will have manageable debt.

Multiple charts are organized in tabs below, showing debt as it occurs across degree and institution types, Pell Grant status, gender, race and ethnicity, and area of study.  

In terms of credentials, the vast majority of students who complete their degrees at two- and four-year public institutions have manageable debt in relation to their earnings. Bachelor’s degrees are associated with higher rates of debt. This makes sense, given more time is needed to attain them than to attain certificates and associate degrees. 

Students who receive Pell Grants across all institution and undergraduate degree types carry higher levels of debt. This is especially true when we look at bachelor’s degrees. Almost 13% of Pell recipients who attain a bachelor’s degree graduate with high debt, compared to less than 5% of non-Pell students.  

When we examine debt by gender, race, and ethnicity, African American females are the most burdened.

Finally, analyzing debt across areas of study and type of institution reveals some interesting relationships. Across all degrees and credentials, areas like arts, education, and psychology tend to have a larger percentage of students with high debt compared to other areas of study. Meanwhile, areas like architecture and engineering typically have a larger percentage of students with no or manageable levels of debt. Although we know from the credentials of value metric that all credentials demonstrate value 10 years after completion, we can see that debt levels vary greatly across student demographics, institution type, and area of study.