I don't have a subscription to the WSJ, so I'm just lifting this quote from Ezra Klein's Wonkbook.
College debt is hitting upper-middle-income households. “Rising college costs and a sagging economy are taking the biggest toll on a surprising group: upper-middle-income families. According to a Wall Street Journal analysis of recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010, the latest figures available…The amount borrowed by upper-middle-income families, meanwhile, has soared. They owed an average of $32,869 in college loans in 2010, up from $26,639 in 2007, after adjusting for inflation, according to the Journal’s analysis.”Ruth Simon and Rob Barry in The Wall Street Journal.
Apt. 11d 
That’s a pretty wide income range: I’d like to see where on the percentile scales the lower (90K) and upper (205K) incomes fall. The 205K almost certainly puts the family well within the top 10%, which I have trouble calling “middle,” even “upper middle.” It may be something else. Something like “I can go on vacation, but I still have to work and I have to borrow to get the best deal on college.” But it is not middle. The 90K probably fits my definition of middle. I’m not certain it fits my definition of “upper.”
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A fair number of the $200k earners are going to be doctors or dentists, and $200k in student loan debt is quite standard for a new doctor. $90k-$200k is truly a very large category and the average debt may be hiding a lot of disparity both in earnings and in debt.
Another issue to bear in mind is that Americans have in general been deleveraging, so higher student debt may be offset by lower debt elsewhere. (Some of that deleveraging has been achieved not through repayment but through defaults, but there’s nonetheless a lower debt burden.)
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This to me sounds like the young adult children of these families have been unable to find employment in the last 5 years. And so they may have chosen to extend their undergrad years or go to graduate school, with associated debt. Honestly, downwardly mobile children of high-achieving parents is distressingly common in my circle at least. (Especially the boys.)
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From the article: To be sure, some families are turning to loans because they spent heavily or used extra cash to save for retirement. More than one-third of parents with incomes of $95,000 to $125,000 with a child who entered college in 2011 didn’t save or invest for that child’s education, according to a survey by education consultants Human Capital Research.
I think the families with high incomes are facing high tuition bills. The College Navigator site allows visitors to discover net cost for each institution. Upper income families pay the max, unless their children qualify for merit scholarships. They may have seen the value of their investments and their homes fall in the last 4 years. If you’re underwater on your mortgage, you can’t take out a second mortgage to pay tuition.
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There’s a thread about this article on College Confidential: http://talk.collegeconfidential.com/financial-aid-scholarships/1376676-wsj-college-loans-hit-upper-middle-class-hardest.html.
Haven’t read the thread through yet myself, but the first 5 posters agree with the article.
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“If you’re underwater on your mortgage, you can’t take out a second mortgage to pay tuition.”
Right. So, the debt that previously might have been labeled “second mortgage” would now be labeled “student loan.”
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According to this chart, in 2010 80% of US households had a combined annual income under $100,000. I don’t consider the top fifth to be included in “middle.”
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“Upper income families pay the max, unless their children qualify for merit scholarships. ”
And, the really hot schools don’t have merit scholarships. I do think that for families in the upper end of the range that the loans might be a cash management strategy (including an unwillingness to take money out of investments when the investment isn’t doing well). It might be dangerous, but it might not be. Say, for example, two tenured professors making 120K each can be pretty confident of their future income. The same might be true for a variety of physicians/government employees. Legal incomes seem less stable, though.
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From my years of listening to personal finance radio and reading the PF blogs, I have the feeling that upper-income earners often have weird financial situations. A person with an income in the low-mid $100s might have a large student loan, large mortgage, large car debt and some credit card debt but at the same time have active 401(k) savings, some money in the bank and maybe even some college savings for the kids. I don’t think you can get a clear picture of that sort of person’s real situation without adding up all the different categories and seeing how it nets out. No single category tells the full story.
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