Commentary: Debt crisis exaggerated; college still worth the investment

By Lex O. McMillan III

I suspect that just about everyone has had the annoying experience of hearing someone hold forth on a subject with unshakable confidence but giving voice to pure bunk. In the heated atmosphere of our current political races, this experience is probably even more common. One of the most annoying that has been making the rounds for quite some time is the recurring refrain of a "student debt crisis." I am probably imagining the frequency given my work as a college president, but it seems that almost daily, I read or hear someone invoke this phrase as if it were as uncontested as the sun rising in the east.

It is certainly true that one can find examples of students - some graduates, some not - who have unwisely taken on what could be termed a "crushing" level of debt to finance their educational aspirations. But a recent authoritative study of two decades of federal financial data by the Brookings Institution demonstrates that the much-decried student debt crisis is at least highly exaggerated. The study also once again affirms the economic benefits of higher education, leaving aside the well-documented social, psychological, and community benefits.

Among the striking findings in the Brookings Brown Center on Education Policy report, written by scholars Beth Akers and Matthew M. Chingos, is that only about 2 percent of those with educational debt owe more than $100,000. Although student debt has risen substantially since 1989, the starting point of the study, so have wages. As of 2013, the average debt of those who have earned a bachelor's degree is just over $20,000. For those with a graduate degree, the average debt is $32,600. The good news is that the average lifetime income of those with debt has grown more rapidly than the burden of their increased debt, thus making it a very good investment.

For example, the authors write that between 1992 and 2010, the average household with student debt saw an increase of about $7,400 in annual income and $18,000 in total debt. In other words, the increase in earnings received over the course of 2.4 years would pay for the increase in debt incurred.

Even more encouraging is that the monthly payment burden of student debt has not increased over the past two decades. For some, it has decreased, but most significantly, the ratio of average monthly debt payments to mean income has decreased dramatically since 1992, from 15 to 7 percent. Additionally, the amount of time allowed to repay loans has increased, so students can borrow more without their monthly payments increasing.

In short, the authors conclude that today's young college graduates who have debt appear to be no worse off than their counterparts of a generation ago, and that the hair-raising tales of "crushing" student debt are, at best, not representative of the young adults who have taken on debt to support their aspirations to higher education.

Unlike a car or an appliance, an education does not depreciate. Most would argue that it increases in value over time as one's life experience gives broader and deeper context to one's formal education. The Brookings study clearly shows that taking on debt for higher education continues to be an excellent investment in one's future.

Lex O. McMillan III is president of Albright College in Reading. President@albright.edu