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There’s a new Brookings paper out this week, which somewhat controversially comes to the conclusion that student loans might not be the generation-stifling, nationwide debt crisis it’s made out to be. There are some surprising findings, including the fact that incomes for college-educated workers have increased alongside student loans, such that “earnings received over the course of 2.4 years would pay for the increase in debt incurred.”
Monthly payments have also stayed about the same over the last two decades. This last point is not because the amount of debt is the same, but because loan terms are longer on average. “I think they underplay the significance of this shift – student loans are now looking more like traditional mortgages in terms of their repayment periods,” says Christopher Ingraham.
Student debt is definitely a problem, but “we do think that the data undermine the prevailing sky-is-falling-type narrative around student debt,” Brookings fellow Matthew Chingos tells David Leonhardt. Where the problem does exist, the more worrying group is not the graduates with huge amounts of debt, but “the hundreds of thousands of people who emerge from college with a modest amount of debt yet no degree,” writes Leonhardt. Matt Phillips agrees, writing that it’s unfortunate that many who write about student debt likely have huge student loans to pay down (associated with fancy degrees), which biases their coverage. He thinks the answer to the student loan crisis is increased funding for state schools.
Then, of course, there’s Choire Sicha, who says quite bluntly that the study is garbage due to flawed methodology. One of the more cogent points that Sicha makes is that the report appears to sample only borrowers in households headed by people under 40, thereby excluding young people still living with their parents, as well as borrowers who have stopped paying their loans. But academic Fredrik deBoer does a point-by-point rebuttal of most of Sicha’s claims about the research methodology and finds them unpersuasive. Student debt is a huge problem, says deBoer, but people (the media, us, perhaps) “generally represent the problem in ways that are not supportable from data.” For example, he says, people with six-figure debt are actually quite rare, and “the housing bubble was orders of magnitude bigger than the student loan crisis.”
All of this said, Chadwick Matlin writes about his own experience with $124,000 in student loan debt, which he paid off in six years: “I’m the outlier, the best-case scenario, the happy ending, and still I’m left without much in savings, since it all went to the accelerated repaying of the loans,” he writes. He also notes in the accompanying tweetstorm that even if this isn’t a macroeconomic crisis, it is a crisis for plenty of individuals (especially those who go to for-profit schools). And that’s worth talking about. — Shane Ferro
On to today’s links:
Why the health care spending estimate was so wrong - Brett Logiurato