Student Loan Debt: It's Not All Bad
As the national conversation about student debt continues, Ben Miller, senior director for post-secondary education at the Center for American Progress, has released a paper criticizing the lack of focus on whether the students who accumulate debt are getting degrees.
We took a few minutes to discuss his findings. The interview has been edited for length and clarity.
Why do you think people overlook graduation rates when they talk about student debt?
I think high debt numbers catch people's attention, so when you set out to write a news story, talking about $100,000 in debt immediately grabs a reader in a way that saying people with $6,000 in debt are really struggling does not. We like to go for the big, scary numbers, even if those aren't really representative of where the true numbers lie.
If you had to summarize your findings in just a few sentences, how would you do so?
The big idea is this: The purpose of student debt is to help someone afford a degree or another credential, so if you look at how much debt it costs per college graduate, the student-loan debt is not nearly as scary as if you just look at the total amount of borrowing out there. It suggests that places that have higher debt levels but also produce a lot of college graduates are probably much better off than places where they may have less debt, but fewer people completing college.
People who borrow and complete college are much better off than those who borrow and drop out. The best available data we have on this is from people who started college in 2003 and were in default by 2009 — over 60 percent of them had dropped out of college. Another 20-some-odd percent had only earned a certificate. So what you see there is that the biggest problems with student debt are occurring among people who borrowed but didn't get the credential they were seeking.
So this is trying to bring in some understanding that debt-with-degree is not nearly as bad as debt-and-drop-out.
Were there any results that surprised you or stood out the most?
I think what surprised me is that some of the states that on paper look like they have the highest debt per borrower, like Maryland and Virginia, also have a lot of college graduates, so their debt per graduate is much lower and much more reasonable. If you just look at Virginia's debt statistics, it looks like a state that's drowning in student-loan debt. But if you look at how it does in college completion, it looks a lot better. So there, it is possible that the student debt accumulated is going toward a credential, and it's not as big of a problem.
By contrast, you have a state like Louisiana, where the debt levels aren't that high, but a lot of the number of people who complete college is also pretty low. And so there, it suggests you might have a lot more people who are borrowing and not graduating, and that's the riskiest place to be if you have student-loan debt.
Do high graduation rates necessarily mean that people are getting good jobs?
Not necessarily. But I think what's important to understand is, before you even want to get into the "are people getting good jobs" conversation, we have to acknowledge that borrowing and not finishing puts people in a very risky situation.
By and large, college graduates do okay with student debt. The big exception to that are the people who only earn a certificate, or who go to low-quality programs where graduation may not mean as much. I think there is an issue we need to think about in terms of the debt levels for graduates versus what jobs they are going into, but first we really have to deal with the people who are so unable to pay their debt that they are defaulting.
For the college graduates who may not get good jobs, they have a payment issue in that they may be paying too much of their monthly income, but they can make it work with some help. For the dropouts with debt, I think we have an utter affordability problem — they are making close to minimum wage, irregularly employed, things of that nature — that require us to address them first.
What can we learn from D.C. specifically, with its odd blend of high completion and debt?
D.C. in some ways is a funny example, because it has so much graduate debt, and it shows where difficulty arises. One out of every twelve people in D.C. is a lawyer, and there is so much debt that comes with getting these graduate credentials that it can start to distort the picture.
And this is what we see nationally. The average bachelor's-degree graduate who borrows is just under $30,000. That's a lot of money, but it's not financially ruinous, assuming you do okay. But the problem is then a lot of people go on to graduate school, where they pick up easily double or triple that amount in a single year, and what was an affordable debt level can quickly become unaffordable. So I think there is a broader problem we have to look at, which is how much debt people are picking up from graduate studies.
D.C. is also a little bit of a strange outlier because it's a city-state If we had the figures for New York City alone, it may look similar as well.
Do you have any proposals on how to tackle the problem of high debt but low attainment?
Part of the issue is that we need to recognize that it's not high absolute levels of debt — it's high relative levels of debt. By that I mean someone who borrows $5,000 and drops out in the first semester can very easily wreck their finances. And so I think we need to do more to take the risk away from people who try college and don't make it through the first semester, because they are in the riskiest place for debt.
I think we probably need to demand more of the federal student-loan servicers to conduct better outreach for borrowers who did not complete, because we don't want to just wait 270 days into the fall and then try to deal with them. And when it comes to students who seem riskier, we need to support them more and try not to ask them to take out too much debt right away, so that if it doesn't work out, we haven't put them in a very dangerous position going forward.
How would you determine what the "risky student" is?
I think that's where we could use more data and analytics here. I think you would want to look at things like high-school grades, their age, are they going part time, and what other responsibilities do they have in their life. We should also ask how good the school is. Does this school tend to have a pretty good track record with these kinds of students, or does it do poorly? Because that's worth knowing, too.
To be clear, I'm not saying we shouldn't enroll these students anyway. We absolutely should. But we shouldn't make it a risky lottery ticket for them to go to college. We should make it so they can try it, hopefully succeed, but if they don't, we have not put them in a difficult place.
Is there anything I should have asked, but did not?
My aim here is just getting people to understand that not all student debt is scary. If you borrow and it leads to a high quality credential, you are probably going to turn out okay. It's the borrowing and not achieving our goals that should be our biggest concern first.
Courtney Such is a RealClearPolitics intern.