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Where the student debt crisis really hits

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When the subject of student loan debt comes up, it's a near certainty that hand-wringing will soon follow.

With more than $1 trillion outstanding in student loans, and millennials holding off on everything from buying stocks to taking out mortgages, small wonder that people are worried.

Yet a new study from the Brookings Institution suggests things may not be all that bad—or at least not in crisis mode you expect.

About a quarter of the increase in total student debt is the result of more students going to college and graduate school, the study found, using the Survey of Consumer Finances administered by the Federal Reserve Board.

Average student debt has certainly risen, with nearly a quarter of students reporting debt of $20,000 or more in 2010, up from "a trivial number of households" two decades earlier, the researchers found. But incomes have risen as well for college graduates, and even, to a lesser extent, for those who only attended some college.

The upshot of those dual trends is that median monthly debt payments as a share of monthly income for people with student loans ranged between 3 and 4 percent every year between 1992 and 2010.

The results run so counter to the prevailing wisdom that even the researchers at Brookings were taken aback.

"The narrative that the sky is falling always seemed a little out there, so we expected to push back a little—but we were shocked by some of what we found," said Matthew Chingos, a fellow at Brookings and a co-author of the report.

So is the student loan debt crisis a myth?

Hardly.

There may not be mountains of Ph.D-wielding junior professors with $100,000 in debt—just 2 percent of borrowers had that much in loans, the study found—but plenty of Americans are struggling with their education borrowing.

"The amount of debt you have is a really awful measure of how much trouble you are in," Chingos said. "Some people with $5,000 in debt are in fine shape, but some maybe don't have a degree and are unemployed and are in trouble."

A case in point: 9 percent of people with no more than a high school degree have some student loan debt, according to a study by the Urban Institute. They may have incurred debt from vocational training or by funding a child's education.

The ability to repay loans is limited for high school graduates with median incomes compared with people with college or graduate degrees. The Urban Institute found that people in households with a family income of $50,000 or less were at least 72 percent more concerned about repaying loans than those in households with income over $100,000.

According to the study, for people ages 20 to 40 with some college but no bachelor's degree, the incidence of debt rose to 41 percent, from 11 percent, between 2010 and 1989. And since household income for this group actually fell between 1991 and 2012, in 2012 dollars, that added debt burden is especially heavy.

That's not to say those with more degrees are in the clear. The Brookings study found that "the top quarter of the country in income holds 40 percent of the debt." But by and large, these are the people who will have the means to pay it back. Heavy borrowing for an MBA or a law degree may leave students with debt, but they can also look forward to a comfortable income.

The bottom line: Those with the most student debt may have less of a problem than you think, and they make the whole student debt picture look better. Yet, there are plenty out there with small loans who are carrying heavy loads.

By Kelley Holland, Special to CNBC

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