In the New York Times today, Laura Beamer and Marshall Steinbaum write about the catastrophe of America's student loan epidemic:
America’s Student Loans Were Never Going to Be Repaid
In recent years, many Americans with student loans weren’t making enough money to pay even the accumulating interest on their debt, let alone make progress on the principal....We predict that most of the outstanding balances — not to mention the roughly $100 billion in new loans issued every year — won’t ever be repaid.
This whole piece is full of weird, mismatched statistics that are designed more to confuse than enlighten—always a sure tip-off that something is fishy. So here are two super-simple pieces of data about student loans. The first contains estimates from the Education Data Initiative:
The vast majority of students with loans attend public universities. On average, it takes them 4-5 years to pay off their loans for an AA or bachelor's degree. A master's degree takes longer. There is no sign here that paying off a student loan is some kind of impossible task.
The second chart comes from the New York Fed, which tracks delinquency rates for student loans. I've inverted that to show how many students remain current on their repayment schedule:
Transition into delinquency has risen slightly over the past two decades to 9%, which means that 91% of borrowers remain current. Again, this is not a sign that student loans are impossible to pay off.
As Beamer and Steinbaum acknowledge, repayment varies considerably between various groups. The poorest obviously have the hardest time. Those who take out loans to get worthless "degrees" from for-profit trade schools are often in bad shape. And students who take out loans but then never finish school—and therefore lack the extra income they hoped for from a college degree—have difficulties too.
All that said, student loans on average are burdensome but not catastrophic for most people. There are some targeted actions we could and probably should take for the worst off, but broadly speaking, student loans just don't deserve the panic they often provoke.
no data on MBAs, MDs, JDs or PhDs? I suspect they would blow up the y-axis of this chart.
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Actually it's only JD's who blow up the y-axis. Other advanced/professional programs have very low default rates, in spite of having higher loan balances on average.
I expect that most Ph.D.'s pay for their education via slave labor - teaching and research assistantships. It is how I did it and how the others that I know who earned the degree did it.
If you use Running Start / College in High School programs to trim 2 years off the University stay, and transfer to the state university, students can cut the cost of their bachelors in half. If they are fortunate enough to be able to live at home and attend as commuting students, they typically cut the cost almost in half again. My daughter lived at home and commuted by bus while she did her civil engineering degree. She could have gone to an expensive private school, instead she dropped out of high school after 10th grade and did early admissions to the state university homors program, atarting her university studies just after she turned 15.
And it helps alot to look carefully at preparing for jobs that pay reasonable salaries after you graduate. My son did a business degree - with a focus in information systems and had to borrow ~ 30 K for his MIS - Data Security program. He has been out for a year and a half now and has saved up enough to pay his loan off - he was waiting to see if he would get part of his loan forgiven.
Is it "Poke the Liberal Bear" day today, Kevin?
That isn't what the page says. It says:
"The average student borrower takes 20 years to pay off their student loan debt.
Some professional graduates take over 45 years to repay student loans.
21% of borrowers see their total student loan debt balance increase in the first 5 years of their loan.
The average medical school graduate’s salary is not sufficient to make their student loan payments."
The chart copied by Kevin is some sort of idealized, what it should be chart, based on estimates of income and expenses.
Humm, how could he have missed that?
Good catch.
The information that Kevin linked to support his argument actually does the opposite....it demolishes his argument.
Will Kevin reverse his opinion now that we see his support actually says the opposite of what he claimed? Or will he shrug it off and stick with his priors no matter what the data says?
JimFive, I agree with your point that Kevin missed some critical info when he (apparently) skimmed that article. But I have to note that one of the sentences you quote from the article is clearly, wildly wrong:
"The average medical school graduate’s salary is not sufficient to make their student loan payments."
Please. That may be true during residency, but once an MD begins actually practicing medicine they can reasonably expect to make $200k/yr, and that's if they chose primary care or a low-paid specialty. There are a dozen medical specialties that average over $400k.
There's a reason why people with advanced degrees have low student loan default rates.
The loans aren't the issue. It's the underlying increases in education costs which is the issue. Unless revisited in recent years, States have underfunded their public colleges relative to the coverage supplied previous to the 2000s.
As a society we've passed more of the funding burden from the State onto the individual and allowed the Feds to compensate via loans. Now a State issue has been swallowed by national discourse about the results and not the cause. The main downsides from loan relief is it doesn't resolve the underlying issue and we'll be in the same boat in a few years.
Unless you're like my friend who accumulated a hundred grand in a master's program, got trimmed out because they grade on a curve, and took care of his dying mother for several years... or like the others who got debt, failed out, and can't ever pay it back?
"And students who take out loans but then never finish school—and therefore lack the extra income they hoped for from a college degree—have difficulties too."
Kevin,
Wow, do you have this wrong. The cost of college has far outstripped the price of most things in the past 50 years. When you went to college in the 70's in the California state system was practically free.
Here's the money quote you missed apparently:
"This situation is the fruit of a tacit agreement among state legislatures, college administrators and the federal government dating back to the 1970s: defund public colleges and universities and shift them to a tuition-based revenue model, with the federal government backstopping the system with student debt so that more students can continue to obtain more expensive education. This change was justified by the idea that higher education “pays off” in the labor market. "
100 + years ago we the people decided that as our society and economy changed public secondary education should be made available free for everybody. Maybe we should revisit that idea in an age when some sort of college or advanced training beyond secondary school would seem vital to the success of the country we live in.
"This situation is the fruit of a tacit agreement among state legislatures, college administrators and the federal government dating back to the 1970s: defund public colleges and universities and shift them to a tuition-based revenue model, with the federal government backstopping the system with student debt so that more students can continue to obtain more expensive education. This change was justified by the idea that higher education “pays off” in the labor market. "
IOW, hoover up as many federal tax dollars as possible.
Sorry Kevin, but both of your charts are nonsense that don't actually refute the article.
The first one is just an idealized estimate based on a whole bunch of factors, and as pointed above, that's merely the average guesstimate.
The second one merely tells you that students keep making their minimum loan payments, but says nothing about whether or not those payments actually decrease their debt. You can never fail a single payment in 50 years and still owe more than what you started with if you can only cover the interest without ever reducing the principal. That is pretty much the definition of an unpayable loan.
On top of what others have said, it may be that 91% of borrowers are still current on their loans.
But there's been a growing portion of those borrowers are are not forming households, not having kids (the cratering of birth rates in recent years is a dark horse candidate for "biggest problem facing us today"), not getting married, not buying houses, and generally delaying the "true" start of their adult life. Why? Because loans suck up a larger percentage of income than they used to. It's pretty simple.
The student loan conversation is so difficult to have, because there is such a huge variety of experiences and choices people have. The people I know who chose lower-cost institutions (public schools or private nonprofits with generous need-based aid) have done pretty well. They had manageable loan amounts that they could pay off on time or faster. Combine low loan balances with a couple years living with parents in your early 20s, and you can really make a dent on them.
Then there are the people who went to really expensive institutions, often for degrees with lower pay levels. They really struggle. Some of them turned to grad school, since that allowed them to put loans on hold and hope for a higher income later. That often made things worse. Some never seem to break out of that cycle. Highly selective institutions are like Crack to many people: going to the ivy league for a master's degree is so tempting, no amount of debt will turn them off.
Then there are the people I know who simply decided they shouldn't have to pay their loans at all. They tend to work under the table and are subsidized by family for their daily lives, and their balances just keep growing. It's surprisingly easy to do, especially if there is a family business you can secretly work for.
26.33% default rate -- non-selective university Art/Humanities majors.
Thanks to AI, we won't need Arts and Humanities, which means that the default rate will improve as these majors just go away.
/S
I expect you to venmo me 150k then. No big right?