Commencement ceremonies at Harvard University, May 24, 2018 (Brian Snyder/Reuters)
We can and should have conversations about making higher ed more accessible and affordable, but honest dialogue toward that goal is only sabotaged by alarmism.
We can and should have conversations about making higher ed more accessible and affordable, but honest dialogue toward that goal is only sabotaged by alarmism.
From media coverage to political talking points, the idea that America’s $1.78 trillion in outstanding student-loan debt is a “crisis” is often taken as a given. Just consider some of these headlines:
“This is How Student Loan Debt Became a $1.7 Trillion Crisis” — CNBC
“The Student Loan Crisis Is Worse Than You Think” — Forbes
These are just a few examples, but they’re reflective of a much broader trend. As of this writing, a search of the New York Times’ website for “student debt crisis” conjures up 3,897 results, including hundreds of headlines for stories that posit the crisis’s existence as a given premise for the entire story. And it’s not just the media. Even the World Economic Forum (WEF) has labeled the U.S.’s student-debt burden a “crisis.”
The political class has echoed this rhetoric ad nauseam. To take just two examples: “The student debt crisis is holding back an entire generation,” Bernie Sanders proclaimed during his unsuccessful 2020 presidential campaign. “Our government saddled a generation with $1.5 trillion in student loan debt,” Elizabeth Warren similarly argued in 2019. “That’s why I’m calling for universal free college and cancelling student loan debt for more than 95 percent of Americans who have it. We must end the student debt crisis.”
But they’re all wrong.
Yes, Americans owed $1.75 trillion in student debt in 2022, according to StudentLoanHero. The typical graduate in the class of 2021 left campus with an average of $29,100 in student debt. All told, 45.3 million Americans hold outstanding student loans. This isn’t chump change, and it’s undeniably a sizable debt burden. Yet is it really a “crisis?”
Americans also owe $1.5 trillion in combined auto-loan debt, with the average balance exceeding $20,000, according to Experian. Don’t forget the $841 billion we owe in credit-card debt, either. Oh, and Americans owe $11.4 trillion in total mortgage debt — more than six times as much as student loans — at a whopping $346,339 average loan, according to BankRate.
Yet we never hear about America’s “auto-loan epidemic” or “looming mortgage crisis.” That’s because big numbers alone don’t constitute a crisis. A deeper look at the reality of student debt in America reveals that while it may be a problem, it’s nowhere near “crisis” level.
The average monthly student-loan payment under typical conditions — a standard ten-year plan with 4 percent interest — is about $287, according to an analysis by the Cato Institute’s Neal McCluskey. With the average recipient of a bachelor’s degree earning $1.2 million or more over a lifetime and having a typical starting salary of $55,260, a $287 monthly payment might be a pain, but it’s surely not a crisis. Indeed, McCluskey points out that annual student-loan payments constitute just 6 percent of a graduate’s average salary. “The data show most borrowers will be able to pretty comfortably pay off their loans,” he said in an interview with the author.
You’ll see horror stories about someone drowning in hundreds of thousands of student-loan debt, but those are extremely rare cases. As the below graph from the Cato Institute clearly shows, the vast majority of student-loan borrowers have manageable debt burdens of $5,000-$40,000:
Image Credit: Cato Institute
Oh, well, this is all just right-wing propaganda from a libertarian think tank, you say? Then let’s consult that bastion of far-right ideology, the New York Times.
“The deeply indebted college graduate has become a stock character in the national conversation: the art history major with $50,000 in debt, the underemployed barista with $75,000, the struggling poet with $100,000,” the Times’ David Leonhardt reported in 2014. “The anecdotes have created the impression that such high levels of student debt are typical. But they’re not. . . .”
The Times cited data from the center-left Brookings Institution which show that “the share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades.”
Translation: The numbers are bigger at face value, but the actual burden of student debt relative to graduates’ income didn’t meaningfully change between 1992 and 2014 (as shown in the below graph). Yes, 2014 was a while ago, but McCluskey’s data suggest that this trend has remained relatively constant, as the average monthly payment today is about 6 percent of a graduate’s income, compared to the median monthly payment of roughly 5 percent shown in the Times’ historical data set.
All of this makes one thing clear: The growing “crisis” narrative was manufactured via political spin and media alarmism, not through large actual shifts in the underlying data.
To be clear, none of this is to say that our current levels of student debt are just fine and dandy. They’re not. Student debt is a real problem for some. And college is absolutely too expensive — absurdly so — yet that’s a topic for another time. But the reality of student debt in America is not a “crisis.”
Most borrowers hold eminently manageable amounts of debt they can repay with relatively modest monthly payments. The few horror stories of individuals drowning in debt they can’t pay back are extremely rare exceptions, not the norm. We can and should have conversations about making higher education more accessible and affordable, but honest dialogue toward that goal is only sabotaged by alarmism and catastrophizing.
