Discussion: No, The Brookings Study On Student Loan Debt Isn't 'Garbage'

Discussion for article #224293

Brookings left out the parents who took out parent-student loans to pay for their children’s college tuition! Why was that segment omitted from the study on student loan debt?

Very odd stock photo choice on this article.

You mischaracterized the biggest problem Sicha has with the Brookings report: He wasn’t objecting to the sampling being people from ages 20-40.

His problem was the sample only included households in which the head of household is aged 20-40. … so this pretty much excludes all households in which the post-college kids live at their parents’ home… which I’m guessing is a huge chunk of those with $50,000+ in student debt.

The study also excluded all debtors who’ve fallen behind on their payments…which is something like 1 in 3 with student-load debt.

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Gotta say, that Atlantic chart seems kinda crappy to me. It doesn’t say, for example, what fraction of people with which debt levels actually graduated (which would be crucial to assessing the value of their degree), nor does it (apparently) associate any value with the time of young people deciding to get a degree. Finally, by assessing weekly earnings for everybody 25 and older by educational level, it may do a good job on saying whether college was a on average a good investment between 1969 and 2009, but it doesn’t say bupkus about whether it’s a good investment today.

Let’s say you have 700 people, and you ask each “what’s the size of your student loan?” And the average is $30,000. So, you ask one more person: how much could their answer change the total?

Even if they had $150,000 in loans (5 times the average), they would move the total by only 1/2 of 1% to $30,170.

That’s why it works. At a certain point, another answer can’t move the total except for a wee bit. Factors that are limited (say, years of education) don’t go even into the dozens so no one can skew an average by somehow having 85 years when the other 30 have 14.

Lemme see, I’m 58, have 50k in student loans and, not surprisingly, am in forbearance (though I pay a reduced percentage per month). So hey, I’m not part of the stats!

In any case, Mike Konczal’s take on this is always worth reading:

No, the study is still “garbage”, because it doesn’t really tell us anything useful about the national student loan situation, and it has the potential to mislead.

deBoer focuses on what appears to be a misunderstanding of statistical sample sizes by Sicha. But regarding of whether Sicha could pass Stats 101, the Brookings study has at least two major flaws.

One flaw is that it excludes households headed by someone over age 40. This means that any young person with large student loans who moved back in with their parents is probably excluded. (I say “probably”, because it seems that some young people who move back in with their parents may count as their own “household” for the purposes of this study, but it’s not clear what rules determine this and how carefully those rules are followed.) Since many of the people with the largest student loan debt burdens moved back in with their parents, this could seriously bias the study in a way that has nothing to do with sample size. (I’m one of them- I graduated with approximately $160,000 in student loan debt, and at age 29 I still live with my parents. I’m not sure whether or not I qualify as an independent “household”.)

The other problem with the study is that it seems to focus on comparing monthly debt burdens of recent student loan debtors with those from the past. While this is a relevant measure if we’re only asking about whether any particular debtor can pay their bills or is about to default, it ignores much of what’s going on. Owing X dollars per month for 10 years is not the same as owing X dollars per month for 25 years. Particularly if after those 25 years the debt is “forgiven” by IBR but then the former debtor suddenly owes a giant tax bill to the IRS, assuming no bailout. The much larger student loan burdens of today- even if the monthly payments are similar- have serious personal, psychological, and macroeconomic effects. Debtors need to save more money and spend less than those from the past, at least if they choose to be responsible, simply because they owe more, regardless of whether their minimum payments are any higher. This reduces household formation and all the demand that goes with it.

The crucial thing is, I finished college with $6,000 in debt at very low interest rates. I paid it off within about 5 years, long ago. I didn’t need any more because my education was about 80% subsidized. Not 20%, as it is today. It is in the national interest to have lots of well-educated people with little or no debt available in the labor market. The “low taxes” religion is what has screwed us.