The Meaning of Manageable Student Debt

Starting yesterday morning, and continuing for the rest of the day, The New York Times ran this headline on the front page of its Web site: “In Study, Most Graduates’ Debt Load Is Manageable.” This phrase quickly multiplied across the Internet, as Times stories tend to do. The study, published by the College Board, was based on an analysis of data from the 2007-08 National Postsecondary Student Aid Survey (NPSAS).

The quantitative analysis in the study is perfectly accurate, which I know because my colleague Erin Dillon and I published an analysis of exactly the same data over a month ago. Among the findings of the College Board report (and ours): a larger percentage of students are borrowing, compared to the last NPSAS, which was conducted in 2003-04. The typical amount of debt (they looked at the median while we looked at the average, but the trends are similar) increased as well, even after adjusting for inflation. In other words, more students are borrowing and students are borrowing more. And while indebtedness is up across the board, the increases are being disproportionately driven by borrowing in the private for-profit sector. In all of these things, we and the College Board agree.

But the Times headline didn’t say anything about how many or how much or from where. It said that a study conducted by an authoritative body had determined that most students aren’t borrowing unmanageable amounts of money to go to college. It said that because the study said this: “…the typical debt levels of college graduates are manageable…” And when called by the Times reporter, one of the study authors, Sandy Baum, said (I’m assuming she wasn’t misquoted): “People think students are drowning in debt, and there is a small proportion of students that borrow an exorbitant amount, but most students graduate with a manageable debt load.” (Our study, perhaps not coincidentally, was titled “Drowning in Debt.”)

In all fairness, the report fragment I quoted above doesn’t end with “are manageable.” It goes on to say “for those who successfully enter the workforce, [and] there is growing concern about the minority of students who borrow much than average and who end up with unduly burdensome repayment obligations.” The “enter the workforce” qualifier seems like a pretty crucial detail in an economy with the highest unemployment rate in decades. But study authors don’t have veto power over how reporters choose to cover their findings–heck, oftentimes the reporters themselves don’t, after their editors finish re-writing and re-framing the copy.

That said, the College Board report is not an analysis of student debt manageability. It doesn’t address the issue quantitatively, one way or the other. Baum has addressed the manageability issue in previous College Board reports like this one, but even that very thorough analysis doesn’t reach any firm conclusions about what percentage of debt is manageable or how many students do or do not meet that threshold.

And whatever definition one chooses to adopt, there can be little doubt that the percent of students with unmanageable debt is rising. That’s the unavoidable consequence of more students borrowing and debt increasing faster than students’ ability to pay. In her previous report Baum noted that monthly payments as a percentage of income have remained relatively stable because of “a combination of rising earnings, declining interest rates, and increased use of extended repayment options.” But as of today income is falling, interest rates aren’t getting any lower, and I don’t think the fact that we’re now stretching college debt over the majority of students’ working lives (some loans now run to 30 years), with a commensurate huge increase in total borrowing costs, is any cause for comfort. The real issue is not where we are, but where we’re going. People didn’t wait for the ice caps to completely melt before trying to contain global warming.

The didn’t wait for health care costs to bankrupt the government before tackling health care reform. They didn’t wait for out-of-control real estate prices fueled by cheap credit and irresponsible lending practices to create a bursting bubble and subsequent global economic cataclysm…oh wait, yes they did! We’ve seen how that turned out.

All of this matters because the idea of manageable debt is the foundation of complacency about rising college costs. Everyone knows that tuition is rising at a rapid rate, faster than inflation, income or anything else one could name. Everyone knows this is leading to more students borrowing more money. But as long they believe that the debt is manageable, there’s a sense that everything works out in the end.

That may still be the case for many or even most students today. (Although it’s cold comfort for the rest–as the College Board study notes, 10 percent of bachelor’s degree recipients (about 160,000 students per year) leave with over $40,000 in debt). But it will be true for fewer and fewer students in the future. By this morning, even the Times had come around, changing the headline to “Study Shows Rise in Average Borrowing by Students” and rewriting the lede accordingly. That’s a start. But a lot more will have to be done to restrain price increases if we’re going to stop the phrase “manageable student debt” from becoming a memory of better times gone by.

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