## Wednesday, July 2, 2014

### On Student Debt

The NYT has this by-now popular article asking people to take a chill-pill. The Reality of Student Debt Is Different From the Clichés.

It is based largely based on a Brookings Institution study which essentially claims that the sky is not falling. The 3 main takeaways from that study (emphasis mine):
1. Roughly one-quarter of the increase in student debt since 1989 can be directly attributed to Americans obtaining more education, especially graduate degrees. The average debt levels of borrowers with a graduate degree more than quadrupled, from just under $10,000 to more than$40,000. By comparison, the debt loads of those with only a bachelor’s degree increased by a smaller margin, from $6,000 to$16,000.
2. Increases in the average lifetime incomes of college-educated Americans have more than kept pace with increases in debt loads. Between 1992 and 2010, the average household with student debt saw an increase of about $7,400 in annual income and$18,000 in total debt. In other words, the increase in earnings received over the course of 2.4 years would pay for the increase in debt incurred.
3. The monthly payment burden faced by student loan borrowers has stayed about the same or even lessened over the past two decades. The median borrower has consistently spent three to four percent of their monthly income on student loan payments since 1992, and the mean payment-to-income ratio has fallen significantly, from 15 to 7 percent. The average repayment term for student loans increased over this period, allowing borrowers to shoulder increased debt loads without larger monthly payments.
The NYT tries to shine a light on the real problem:
The vastly bigger problem is the hundreds of thousands of people who emerge from college with a modest amount of debt yet no degree. For them, college is akin to a house that they had to make the down payment on but can’t live in. In a cost-benefit calculation, they get only the cost. And they are far, far more numerous than bachelor’s degree holders with huge debt burdens.
Here is an attempted "takedown" of the report and the NYT article.

And here is a well-reasoned takedown of the takedown.