Jeff Selingo’s post the other day was a good reminder of how much vital information about student debt we lack, notwithstanding the huge public attention that’s been paid to rising student borrowing in recent years. Both families and policymakers seeking to understand federal student loans and parental PLUS loans need much more fine-grained information about debt levels, default rates, and the like. Still, it’s important to remember that we do have enough information—and rigorous analysis of said data—to make a persuasive case that for many students, much of the time, taking on debt to get a college degree makes a lot of economic sense.
My text here, in case you missed it, is a great piece by Christopher Shea that appeared in the Washington Post on March 21. Yes, outstanding student debt has reached extraordinary levels, Shea writes. Yes, private colleges have allowed their tuition to explode (because of state budget cuts, he doesn’t fault publics for their rising fees, though I think he probably should). But the leading economists whose work he surveys offer chapter and verse—including some figures I hadn’t seen before—about why the alleged debt crisis has been overblown.
Here are a few highlights:
- Students borrow less than the averages suggest. The much-cited figure of $27,000 in average undergraduate debt (which actually applies only to the two-thirds of graduates who borrow, and doesn’t seem unreasonable to me) is distorted by outlier borrowers, including for-profit college graduates. Christopher Avery of Harvard and Sarah Turner of the University of Virginia found much lower figures at, say, public, four-year colleges ($7,500 in debt for bachelor’s degree grads) and even private nonprofits ($15,500).
- Shea quotes another economist, Justin Wolfers of the University of Michigan, who says a bunch of students who work long hours to avoid borrowing are making a mistake—they’re more likely to drop out and would be better off borrowing more. Naysayers notwithstanding, the average economic returns to a college education are huge.
- As we’ve known for years, low-income students too often overestimate the cost of college and underestimate the amount of aid that’s available. This is one reason for the “undermatch” problem that’s been in the news lately. Many talented, low-income students don’t even apply to the kinds of selective colleges that could give them the best aid packages and instead go to institutions with lower sticker prices—and higher dropout rates. “More than a debt crisis,” Shea writes, “what poor students contemplating college face today is an information crisis.”
Student debt is certainly nothing to be sneezed at—I don’t think we’re wrong to worry about it in some cases. Among other things, we need to be concerned about indebted students whose degrees don’t make them very employable, the distressing number who drop out of college entirely with loans that are all the harder to repay without a degree, and the possibility that loans contribute to tuition inflation.
Still the core principle seems sound to me: We provide government loans to people who don’t have a lot of education and financial resources; those loans allow students to develop knowledge and skills at college; and after graduation they become much more valuable in the marketplace and start earning enough money to gradually repay the loans. Our system can surely be perfected, but in its broad outlines, as Shea’s article reminds us, is perfectly defensible.