The Reality of Student Debt

The deeply indebted college graduate has become a stock character in the national conversation: the art history major with $50,000 in debt, the underemployed barista with $75,000, the struggling poet with $100,000.

The anecdotes have created the impression that such high levels of student debt are typical. But they’re not. They are outliers, and they’re warping our understanding of bigger economic problems.

In fact, the share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades, according to data the Brookings Institutions is releasing on Tuesday. Only 7 percent of young-adult households with education debt have $50,000 or more of it. By contrast, 58 percent of such households have less than $10,000 in debt, and an additional 18 percent have between $10,000 and $20,000.
“We are certainly not arguing that the state of the American economy and the higher education system is just great,” Matthew Chingos, a Brookings fellow and one of the authors of the new analysis, told me. “But we do think that the data undermine the prevailing sky-is-falling-type narrative around student debt.”

The misperceptions matter because they distract us from the real trouble with our higher education system. It’s not the graduates of expensive colleges who are struggling to get started on a career. Such graduates make for good stories (and they tend to involve the peer group of journalists), but history suggests that most of them will do just fine.

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.

The solutions to the dropout crisis have some overlap with the solutions to the so-called student-debt crisis: more accountability for colleges. For the most part, though, the two issues are different — and require different answers. Lifting the nation’s college graduation rate depends on better, more cost-effective education, rather than merely cheaper education.

Source: http://www.nytimes.com/2014/06/24/upshot/the-reality-of-student-debt-is-different-from-the-cliches.html?ref=education

Business Day in Madison has become the premiere business gathering

Explore Buildings & Properties

Explore Marathon County, Wisconsin

Powered by Wisconsin Public Service and Marathon County

Marathon County Manufacturing Consortium