- Roughly a quarter of the increase in overall student debt can be attributed to the fact that more people are obtaining graduate degrees.
- Increases in average lifetime earnings have more than kept up with increasing student-debt loads.
- Average monthly student-loan payments have stayed the same or gone down a bit, due in part to longer loan-repayment periods.
The Brookings Report was widely reported in the media, including newspaper pieces in the New York Times and Slate. The Times quoted one of the Brookings authors as saying, "The evidence does not support the notion that student loan debt is dragging down the economy." The Times article also pointed out that more than half of student-loan debtors owe less than $10,000; and more than three quarters of borrowers owe less than $20,000.
Without quarreling with any of the Brookings report's findings, I will just point out a few indicators that show a much less rosy picture:
First, as several newspaper articles have recently pointed, about one in five college graduates under the age of 35 now live with their parents--a percentage that has grown in recent years. Undoubtedly, student-loan debt is partially responsible for the growing number of college-educated young people who still live with Mom and Dad.
Second, the student-loan default rate is going up, more than doubling over the course of just a few years. According to the Department of Education's most recent report (issued in October 2013), about 15 percent of student-loan borrowers default within three years of beginning the repayment phase of their loans. For students who attended for-profit institutions, the rate is about 21 percent.
And, as I have pointed out, for-profit colleges have been successful in hiding their default rates by encouraging their former students to sign up for economic hardship deferments that keep borrowers from being counted as defaulters even though they are not making their student-loan payments.
In fact, according to a recent report by the Consumer Financial Protection Bureau, we now have about 7 million people who have defaulted on their loans and another 15 million borrowers in the repayment phase who have obtained some sort of deferment that allow them not to make payments.
It is true, that millions of people owe only modest amounts on their student loans, and millions of college-loan borrowers are managing to make their monthly loan payments without difficulty.
But to say that monthly payments have not gone up overall because more people are taking 20 or 25 years to pay off their loans instead of 10 years is somewhat disingenuous. People who are forced into long-term repayment plans because they can't afford to pay off their loans over 10 years will be paying a lot more in interest on their loans and many of them will not be making payments large enough to cover accumulated interest.
Furthermore, even if most people are not burdened by their college loans, those 7 million defaulters have suffered a financial catastrophe. Their credit ratings have been ruined, they are subject to wage garnishments, and they are saddled with debt that most of them cannot discharge in bankruptcy. For these people--the student loan program has been a disaster.
In short, I think the Brookings Institution is wrong to suggest that a student loan crisis is not on the horizon. On the contrary, the crisis is already here.
Beth Akers & Matthew M. Chingos. Is a Student Loan Crisis on the Horizon? Brookings Institution, June 2014. http://www.brookings.edu/~/media/research/files/reports/2014/06/24%20student%20loan%20crisis%20akers%20chingos/is%20a%20student%20loan%20crisis%20on%20the%20horizon.pdf
David Leonhardt. The Reality of Student Debt is Different From the Cliches. New York Times, June 24, 2014. Available at: http://www.nytimes.com/2014/06/24/upshot/the-reality-of-student-debt-is-different-from-the-cliches.html?_r=0
Jordan Weissmann. Are We Overreacting to Student Debt? Slate, June 24, 2014. Available at: http://www.slate.com/articles/business/moneybox/2014/06/brookings_institution_student_debt_crisis_have_we_all_overreacted.html