Advocates and lawmakers such as Senator Elizabeth Warren (D-Mass.) argue passionately that the student debt burden has reached a crisis point in this country.
But that’s Chicken Little logic, according a report released on Tuesday by the Brookings Institution.
“The sky is not falling,” Matthew Chingos, one of the report’s coauthors, told Fusion in a phone interview. The report, he said, found that most borrowers are no worse off today than they were a generation ago, despite an increase in the average amount of debt taken on by students.
That might sound like hooey to those familiar with horror stories about recent graduates thrust into a dismal job market saddled with $200,000 in debt, only to convert their parents’ basement into a grad pad.
But the Brookings Institution says those horror stories aren’t the norm, even if it seems that way.
The report’s authors calculated that while much of the increase in debt falls on graduate students, who saw their average debt quadruple to $40,000 between 1989 and 2010, graduate students make up a small percentage of all students with debt. In reality, most students are coping with much smaller debt loads and smaller increases in debt-load. The report also found that the lifetime income of college-educated Americans has kept pace with increases in debt.
Critics of student debt to other reports that say real earnings for college graduates have plateaued in recent years. But that just depends on how far back you go in time, the Brookings’ investigators say. Compare to real earnings from the 1980s and ‘90s, wages for young college graduates have gone up, the report found.
The authors of the new Brookings report say their research shows that the average monthly payment burden faced by student borrowers has remained about the same for the past 20 years or so. Over that time, borrowers have consistently spent three or four percent of their monthly income on student loan payments. It's true the average time it takes a borrower to pay off his or her debt has increased, but that’s not necessarily cause for alarm, Chingos says. School loans are still a sound investment, he stressed.
Jennifer Wang, an education policy expert for student advocacy group Young Invincibles, says she’s “glad to see everyone taking a closer look at student debt levels.” Still, she wants think tanks such as Brookings to “not just look at the numbers,” but talk to real borrowers whose stories “show our generation is still very much struggling to get back on our feet.”
Wang points out what she calls a “discrepancy” in the data released by the New York Fed and Brookings. The Brookings data suggests just seven percent of borrowers have more than $50,000 in debt, while the Fed data puts the figure at 13 percent.
But the numbers can be cooked and served in a lot of different ways. The Brookings report looked specifically at young households, Chingos notes. The Fed data, on the other hand, isn’t as targeted, so it could include parents taking out loans for their children.
Richard Fry, an education expert with Pew Research Center, said the Brookings’ data set has more information on people’s assets and demographics, while the Fed data works off a nationally representative sample of credit reports. In other words, the Fed knows a lot about what people’s liabilities are, but not necessarily their assets. So comparisons between the two data sets are not apple-to-apple, he said.
So what’s to be done about the situation? Focus on the cost of attending college, and not just on student loans.
“The issue with all of this brouhaha is that we’re focusing on the symptom, when we need to do something about the disease,” Chingos said.
Congress can’t make college cost less, the researcher said, but the government should make data about graduates — how much they earn, where they went to school, how much student loans they they took out, etc. — more accessible. Young Invincibles would like to see Pell Grant funding made mandatory instead of eligible for the chopping block.
President Obama has proposed a ratings plan for colleges, which he would like to tie to how much federal loan money schools receive. But that will take an act of Congress, which pundits say is unlikely anytime soon.
Where Washington has stumbled, millennials need to take up the banner and make the cause their own.
“Young people are really in need of solutions,” Wang said, “and we’re paying attention.”
Emily DeRuy is a Washington, D.C.-based associate editor, covering education, reproductive rights, and inequality. A San Francisco native, she enjoys Giants baseball and misses Philz terribly.