Friday, August 19, 2016
"There's a new book out about the student loan crisis [Student Debt: Rhetoric and Realities of Higher Education], or what author Sandy Baum suggests is a "bogus crisis." Baum, a financial aid expert and senior fellow at the Urban Institute, claims it has been [sensationalized and exaggerated] by the media in search of a spicy story and fueled by politicians pushing "debt free college" proposals. . . . "
"People who earn bachelor's degrees, by and large, do fine.
The problem is that we have a lot of people actually borrowing small amounts of money, going to college, not completing [a degree] or completing credentials that don't have labor market value. They tend to be older. They tend to come from disadvantaged or middle-income families and they're struggling. [But] not because they owe a lot of money. . . .
Its not realistic to say we're going to pay people to go to college [for free]. Someone has to pay. We can have everyone pay much higher taxes. But short of that, it's not clear how we would pay. . . .
There are some people who borrowed under fraudulent, deceptive situations and their debt should be forgiven. There are people for whom education did not work out through no fault of their own and their debt should be forgiven. . . . We don't give people very much advice and guidance about where [and] when to go to college, how to pay for it, what to study. . . .
[[There are facts that] get little or no attention because they don't fit the "crisis" narrative:
- A third of college students who earn a four-year degree graduate with no debt at all. Zero.
- A fourth graduate with debt of no more than $20,000.
- Low-income households hold only 11 percent of all outstanding [student] debt.
- Almost half of the $1.3 trillion in student loan debt is held by 25 percent of graduates who are actually making a pretty high income.]
This is an investment that pays off really well. The median earnings for young bachelor's degree recipients is about $20,000 a year higher than the median earnings for high school graduates.
Student debt is really creating a lot of opportunities for people. People wouldn't be able to go to college otherwise."
Baum notes that many graduates with high debt levels (>$100,000) have advanced degrees, high expected incomes, and low default rates.
"The highest debt levels are for those earning professional degrees . . . Despite high debt levels, default rates among graduate borrowers are very low." However, Baum expresses some concern about those pursuing expensive master's degrees in fields "that rarely lead to the kind of earnings that doctors, lawyers, and MBAs can expect."
Baum's findings are broadly consistent with recent research by Beth Akers and Matthew Chingos, reviewed by David Leonhardt for the New York Times. Akers and Chingos have a new book coming out this fall.