The Student-Loan Crisis and an Attempt to Explain It Away

In an attempt to buck conventional wisdom, Nicole Allan and Derek Thompson of the Atlantic
are tackling what they call “The Myth of the Student-Loan Crisis.” In a neat little infographic,
they argue that both the cost of tuition and student debt obligations are lower
than we think, that college is always and everywhere a wise investment, and
that students would be wise to take out more debt, not less. Fresh thinking,
indeed.

Their figures on tuition, for one, are incomplete. They
note that the average tuition for “first-time, full-time students” is
$27,453 for four-year schools and $15,267 at two-year schools. By this they’re
essentially arguing that college isn’t that expensive and therefore that
student loan burdens are overhyped. However, a more honest assessment would
break down tuition costs by type of institution. The National Center for
Education Statistics shows
that the average cost of college for students is $13,600 at public
universities, $36,300 at private not-for-profit institutions, and $25,500 at
for-profit colleges and universities. Once we think about student debt in terms
of the types of institutions, the picture of student debt becomes more
complicated than the way that the Atlantic paints it. Contrary to their
implied argument, the burden of debt is heavier at the cheaper schools: the default
rates at for-profit and public schools are significantly higher than
those at private colleges, the most expensive of institutions. Therefore, the
cost of college alone does not tell us very much about student debt. It is the
financial background of the students attending these institutions that matter
more. Indeed, the group of students with the most debt and worst default
rates–students at for-profits–tend to be poorer than their peers at other
institutions.

Let’s now look at their claim that student loan
obligations are blown out of proportion. They assert that “Horror stories of
students drowning in $100,000+ debt might discourage young people from
enrolling in college, but they are as rare as they are terrifying.” This
is true, but it is also a straw man. The observers of American higher-education do
not devote their time to warning students about six-figure debts; rather, they
are aware that the average loan obligation is around
$27,000, and that this debt hampers opportunity for many young people,
especially given today’s poor job market for graduates. Moreover, numerous
commentators have speculated that the burden of student debt might be impeding
the recovery of the housing market, since college graduates are paying down
their loans rather than spending earnings on their first homes. Student
debt isn’t a monster; however, it is an ever-expanding millstone that drags down our
economy. The authors, who present only static figures, are
uninterested in this point.

Indeed, the authors hope to reassure us that
American higher-ed is doing just fine.  The authors thus assert that
“the economic value of college…is indisputable” and that “as
investments go, college is the best bet around.” They then provide figures
showing that college graduates have higher earnings and lower unemployment
rates high-school graduates. Not only does confuse correlation with causation,
but it assumes that a college degree will hold its premium in perpetuity. The
fact that half of college graduates last year were un- or under-employed upon
graduation does not faze them; neither does the figure that nearly half of
college graduates hold jobs that do not require a college
education. One wonders what would.  

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