It’s enough to make a teenager wonder, as Newsweek asked in a cover story last fall: “Is college a lousy investment?”
But there’s a big problem with some of those extreme anecdotes. For most U.S. students, college needn’t come with mounds of debt. And, as many economists have shown, it’s almost always well worth what it does cost — assuming that you graduate and, if your loans are largish, study something that actually helps lead to a job. Perhaps the biggest problem: All the dire talk about debt overload can scare off young people for whom education debt can have huge long-term payoffs.
No one denies that overall college borrowing is rising even as family assets have taken a recession-related hit. The amount of outstanding student debt in the United States is approaching $1 trillion. Private colleges have conspicuously failed to keep tuition under control. (At public colleges, blame for rising tuition is better laid at the feet of lawmakers who keep cutting subsidies.)
But research by economists refutes the prevailing tales of woe. “The claim that student borrowing is ‘too high’ across the board can — with the possible exception of for-profit colleges — clearly be rejected,” wrote Christopher Avery, a professor of public policy at Harvard, and Sarah Turner, an economist and education professor at the University of Virginia, in a survey of the topic in the Winter 2012 issue of the Journal of Economic Perspectives.
Avery and Turner’s argument is two-pronged: First, debt loads are lower than the average prospective student has been led to believe. Second, the economic returns on a college degree continue to be massive; in fact, they are much greater than they were a generation ago.
Among households with college debt, the average balance in 2010 was $26,682, according to the Pew Research Center. That could be reasonable or unreasonable, depending on the context. But, economists say, it’s also skewed by a small number of people, at a minority of institutions, who borrowed extraordinary amounts.
Breaking debt down by type of institution creates a far less terrifying picture. In their paper, Avery and Turner looked at the debt that students had amassed six years after first enrolling, in 2004, in three kinds of four year-colleges — public, private nonprofit and for-profit — as well as two-year public colleges. (As of 2010, public colleges granted about 64 percent of bachelor’s degrees, private non-profits 30 percent and for-profits 6 percent.)