Economists Offer Unconventional Wisdom on Student-Loan ‘Crisis’

Student debt is a crisis, holding back the economy and hobbling a generation. Wonder why today’s young adults aren’t getting married, having children, buying homes, starting businesses, saving the world? Look no further, the culprit is obvious. That’s the conventional wisdom, and it’s taken for granted in many news articles and plenty of policy prescriptions.

That narrative, however, is misguided, according to two new books. What’s worse, they argue, the crisis talk precludes a closer examination of the student-loan system’s real problems and hinders efforts to help the borrowers who are struggling the most. To push back on that understanding of debt, the books offer data, evidence, context. But will any of that change people’s minds? After all, the assumption that the country is in a student-debt crisis is everywhere.

The books, Student Debt: Rhetoric and Realities of Higher Education Financing (Palgrave Macmillan, 2016), by Sandy Baum, and Game of Loans: The Rhetoric and Reality of Student Debt (Princeton University Press, 2016), by Beth Akers and Matthew M. Chingos, make complementary arguments — as one might guess from the similar subtitles. (In fact, the authors know each other. Ms. Baum and Mr. Chingos are now colleagues at the Urban Institute, though they weren’t aware of their similarly themed book projects until last summer, when he was starting there.)

Both books describe the current student-loan landscape and trace its history. Based on that evidence, they throw water on the idea of a general crisis and seek to redirect readers’ worried attention from high-debt borrowers (many of whom hold advanced degrees) to college dropouts, who have less debt but are much more likely to default on it. That perspective guides their policy recommendations, which describe tailored ways to help struggling borrowers, versus approaches like forgiving all debt or refinancing interest rates, a move that would disproportionately help those who’ve borrowed a lot.

The stakes for changing the conversation are high, Ms. Baum said in an interview.

“If we keep talking about student debt as an unmitigated evil,” she said, “we’re going to discourage a lot of people from going to college.”

But persuading the public won’t be easy, Mr. Chingos admitted. “Changing national debates is like turning a battleship,” he said. If Game of Loans “can in a small way contribute to nudging the battleship a couple degrees in the right direction,” Mr. Chingos said, “I’d be pleased with that.”

Kristen Dickerson thinks the public fixation on student debt brings some benefits. “It’s definitely not a positive viewpoint,” said Ms. Dickerson, a school counselor at Gahanna Lincoln High School, outside Columbus, Ohio. “But at the same time,” she said, “I’m not sure that’s a negative thing.” Ms. Dickerson doesn’t recall hearing any discussion of the pros and cons of borrowing back when she was heading off to college. But these days, it’s something that the families she works with have many questions about.

“I definitely think the media has done a good job of bringing this to light,” Ms. Dickerson said. Sometimes students tell Ms. Dickerson that they don’t want to borrow at all. Her response? “Student loans aren’t bad,” she said. “You just have to watch what you take out.”

Lately Ms. Dickerson has observed that families are waiting until students have their aid awards from every college they’ve been admitted to before making a careful choice. And that’s a good thing, she said. Both finding the right fit and making sure it’s affordable are important.

Distorted Impressions?

What Student Debt and Game of Loans share more than anything is an understanding of the logic behind student loans. All three of the authors are trained in economics, Ms. Akers pointed out in an interview. She is a fellow at the Brookings Institution, where Mr. Chingos also worked before moving to Urban. From an economic perspective, the idea that people borrow money to invest in themselves and reap a benefit later makes perfect sense. The problem with the status quo, as the authors see it, is something much narrower: It’s not that so many students take out loans to help pay for college; it’s that the system doesn’t work for everyone, and better protections are needed to help those who run into trouble.

The public’s broad anxiety about student debt, Ms. Baum writes, is similar to other instances in which general worry overshadows the more narrow frequency of a problem, such as fears about the dangers of data breaches at stores and banks. Because it tends to focus on worst-case scenarios, she writes, “reading the news distorts our impression of the magnitude of the issue.”

Ms. Baum’s position isn’t that college is such a good investment that students should bear the full cost, she said. It’s that there should be debate about how much of the burden of paying for college rightly falls to students versus taxpayers, instead of a knee-jerk assumption that it’s wrong to ask students to contribute to their own educations.

Economists are trained to consider alternatives and opportunity costs, to think of how best to allocate limited resources, Ms. Baum said. They don’t assume there’s enough money to pay for every desired policy. So even an economist focused on higher education can’t take it for granted that college should be the country’s No. 1 funding priority. “As a group, the people with college debt are not the most oppressed people in society,” she said. After all, most people with student loans went to college, an advantage many others lack.

Besides, Ms. Baum said, if other policy priorities like early-childhood education and health care aren’t addressed, fewer people will be ready for college in the first place. Higher education’s problems can’t be solved by higher-education policy alone, she said, because “by the time you’re 18, it’s too late.”

Questions of ‘Class Privilege’

So the authors are frustrated by the kinds of anecdotes that often illustrate the student-debt problem: the travails of traditional-age graduates of name-brand, four-year colleges who’ve borrowed way more than the national average (nearly $30,000 for graduates who borrowed at nonprofit colleges) and are working in low-level service jobs, if they’re working at all.

“It’s class privilege,” Mr. Chingos said. “The public discussion of this is about the problems of readers of The New York Times,” he said. “The real problems are typically for 30-year-old single moms with $5,000 in debt, with credits, but no credential, probably from a for-profit college.”

The authors turn to what the data show: what’s happening nationally, on average, and over time. They “tell a very compelling story, steeped in data,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators, who has read Ms. Baum’s book and is familiar with Ms. Akers and Mr. Chingos’s earlier work on the subject.

There’s just one problem. People connect with — they remember — anecdotes. That’s as true of policy makers as it is of the rest of us, Mr. Draeger said. The fresh-faced English-major-turned-barista who’s $80,000 in debt is memorable. The data? Not so much. The nonfiction books that persuade readers make a big effort to entertain them, Mr. Draeger said. The student-debt books aren’t aimed at academics, but still, no one would accuse them of being what Mr. Draeger calls “infotainment.”

So who exactly are these books for? They’re both pretty short, and assume little prior knowledge. Still, it’s hard to imagine either one on the nightstand of a typical parent of a high-school junior. Student Debt is “obviously not an advice book for families,” Ms. Baum said. She sees her audience as journalists, policy makers, and people who are particularly interested in the issue.

“I wrote the book because I wanted to be able to talk about it,” Ms. Baum said. After all, many more people will hear about a book than will ever actually crack it open.

Worries About Rhetoric

For the most part, the authors are trying to correct the view of student debt held by an anxious public. But that’s not to say that all experts share their assessment of the scope of the problem, or their ideas on how best to solve it.

Ms. Akers and Mr. Chingos, in particular, spend a lot of time on the question of whether a crisis is present, or imminent. Their conclusion? “It is true that many borrowers are facing personal crises related to student debt, but the overall body of evidence contradicts the notion that a student-lending crisis exists on a systemic level,” they write. “This distinction may seem semantic, but recognizing the difference has important implications for policy making.”

Mark Huelsman, a senior policy analyst at Demos, a liberal-leaning think tank, agrees with the authors about which borrowers are really struggling. But that, he said, doesn’t mean that there isn’t a student-loan crisis.

Some people see that the typical borrower is all right but that those in some corners are struggling, and think that “crisis” is the wrong description, Mr. Huelsman said. He’d put the authors in that category. Others look at what’s happening in those corners and see a crisis. “Most smokers don’t die of lung cancer,” Mr. Huelsman said, and “most people in the wake of the housing crisis didn’t lose their houses. But there’s real pain.”

Mr. Huelsman is also unconvinced that calling student debt a crisis hurts would-be students. “I’m much less worried about rhetoric preventing people from going to college,” he said, “than prices” — which do keep some people out.

There’s plenty of room for experts to disagree on questions like those. But for many casual observers, the evidence and arguments presented in Student Debt and Game of Loans will be new. And if they read either book, that could help inform a public debate that’s bound to stick around for some time.

Beckie Supiano writes about college affordability, the job market for new graduates, and professional schools, among other things. Follow her on Twitter @becksup, or drop her a line at beckie.supiano@chronicle.com.