College Debt: How Much is Too Much?

The New York Times reports the remarkable fact that student loan debt exceeded credit card debt for the first time last year and is about to head north of a trillion dollars. Reaction falls into two camps: 1) This is a big problem and someone should do something about it (Mark Kantrowitz, Lauren Asher, Deanne Loonin); and 2) This is vaguely regrettable but not a big problem because college degrees are still, on average, worth more than what people pay for them, and thus borrow for them (Susan Dynarski, Sandy Baum, Cecilia Rouse).

I find the latter position to be troubling. First, even if the average college graduate (and here we’re putting aside the very large number of debt-burdened non-graduates) earns more over their lifetime than the average college loan, that still leaves a lot of individuals on the wrong end of the distribution. If the number of people for whom college is a bad deal financially is significant and growing, then we should try to fix that problem regardless of the average.  Loan default and repayment rates are a pretty solid indicators here and they are bad and getting worse.

Moreover, what exactly is threshold at which student loan debt can no longer be characterized in the aggregate as “good debt” that “pays off over the whole life cycle” (Dynarski), or an issue about which experts are “not concerned, from a broader perspective” (Baum), or something which “the vast majority of graduates can expect to cover” (Rouse)?

Those are extremely vague terms. Is the threshold something other than “a dollar less than the average value of a college degree”? Because there’s still a fair amount of distance between here and there and a whole lot of wasted money and financial immiseration in between. If “a trillion dollars” and “more than credits cards” aren’t cause for alarm, what is?