Monday, September 3, 2012

Sharing the right data on student loans

Public discussion about student indebtedness is composed of three less than useful strands.  The first frets about the overall amount of student indebtedness, which has now topped 1 trillion dollars and surpassed the amount of credit card debt in the US. The second points to extreme cases of student debt, particularly for students in fields where salaries are low or uncertain. And the third tries to respond to the first two by reporting average amounts of student indebtedness.

Mixed together, the three fail to help families make good decisions because they are all true, but taken together provide an incomplete view of student indebtedness--one that is unlikely to apply at all to an individual student.  Let me propose that to help round out the picture of student debt, financial aid offices should provide these two pieces of data for students at their institutions:

  • The range of student indebtedness. It should be a simple thing for schools to make a chart showing the range of student indebtedness, rather than just reporting the average amount of debt.  I suspect such a chart will be sobering both for those fretting about the student debt crisis (since a perishingly small proportion of students rack up huge amounts of debt), and for admissions officers at schools, since the median and the mode of indebtedness may in fact be higher than the average.
  • Student debt by major. It is almost certainly the case that there are students in low-paying fields (history, for example), who have high student debt.  But the most common location of highly indebted students are graduate students in professional fields--law, business, healthcare.  At the undergraduate level, debt is closely related to time in school, so majors with high indebtedness are likely to be majors where it takes a long time to graduate.  Such data would help families make informed choices about borrowing in anticipation of future earning power.  And it would force institutions to reform the curricula of programs where student debt is higher because graduation is slower.

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