A very few borrowers “are doing crazy and stupid things,” Turner said in a recent interview, but “the median person borrowing $15,000 at your average research university is doing a very rational thing.” According to one government standard for manageable debt, someone with a salary of $26,000 should be able to pay off a $20,000 debt in 10 years — with monthly payments of $210 or so — without undue strain. Things may have gotten worse since 2010, but not radically so.
One explanation for the mismatch between perceptions and reality about debt is that few people pay the “sticker price” at private colleges. Many middle-class and poorer kids get grants. In addition, many public colleges, despite tuition increases, remain relative bargains, and most parents are still (wisely) managing to save for college.
Economists have worked hard to measure the return on a college degree, and, while it’s a tricky thing to pin down, it’s potent. In one estimate, Avery and Turner calculated that the average man who earned a college degree in 1978 gained a lifetime earnings advantage of $360,000 over his high-school-graduate peers. For men who graduated in 2008, the lifetime earnings advantage, in equivalent dollars, ballooned to $600,000 — and women get a comparable boost.
Wouldn’t you consider taking out a $20,000 or $30,000 loan — the cost of a Honda Accord with a few options — for that kind of return?
Justin Wolfers, an economist at the University of Michigan, is another skeptic of the college-isn’t-worth-it thesis. “Not only does a college degree give you a higher stream of income, but it’s more recession-proof,” he says. He points out that the unemployment rate for those with at least a bachelor’s degree was 2 percent before the recession, rose to 5 percent and is now below 4 percent. In contrast, unemployment for people with only a high school diploma spiked to 11.9 percent and lingers at 8.8 percent, according to the Bureau of Labor Statistics.
Like Avery and Turner, Wolfers says there are a considerable number of cases in which students are borrowing not too much, but too little. Researchers estimate that half the students who work more than 20 hours a week to pay for school take out no loans. Since that amount of work leads to higher dropout rates and lost opportunities on campus, borrowing might be a far wiser strategy.