ACCORDING to a recent piece in Reuters, all of the concerns about student loan debt, under-employment of college grads, and the like are overblown. The arguments underlying this proclamation are that the majority of the debt is falling on higher earners, and wages for the educated masses are rising relative to the uneducated masses.
From the piece:
A Reuters analysis of Federal Reserve data shows that over the past two decades the young with higher incomes have gone from owing less of the debt than the average household to owing considerably more.
. . .
[T]he analysis of the Federal Reserve’s Survey of Consumer Finances, a triennial survey published in September with 2013 data, makes it clear that heavy borrowing is usually rewarded with big salaries. The increased concentration of debt among the well-paid should ease concerns that the surge in debt is a wider economic threat.
That’s the claim, now what about the evidence?
The data show that most of the nation’s overall loan balances are held by those earning more than $60,000.
For starters, the percentage of observed households (young families, defined as households where the head is between 20 and 40 years of age) with education debt, as well as the amount of debt, is growing. From the survey:
Moreover, those with debt is growing as well. In 2001, the percentage of young families with education debt was 22.4%, which rose to 38.8% in 2013.
As a percentage of all installment debt, student loans are consuming a larger share across income levels for families. In 1989, for instance, for the top 10th percentile and bottom 20th percentile of incomes, education was 6.7% and 40.3% respectively. In 2013, those figures had grown to 39.7% and 50.5%, respectively.
The piece attempts to argue that there has been some grand shift in the holders of education debt. Sure, top end earners hold more of the debt, but from 2001 to 2013, there was not this shift implied by the author of the piece. From the Federal Reserve survey:
If there has been a shift, it’s been from middle income earners to lower earners.
Of course, the ability of debt holders to absorb the growing debt is overstated as well. Look at the following paragraph (my emphasis):
Seen another way, as the salaries of the well-educated have grown relative to everyone else over the last quarter century, so has the borrowing that has paid for their training.
See it? The author did not simply write that the salaries of the well-educated have grown nominally, but rather in relation to others. Factually correct, but this makes thrust of the piece specious. College grads relative to high school grads are earning more; in other words, the gap between the two (college vs high school grads) is growing . . . relative to one another. The growth in the gap is driven more by the decline in wages for high school grads than growth in wages for college grads. So, while debt is increasing, wages are not; at least not for everyone.
As the survey reveals, incomes for the top are growing, while the bottom 90 percent are seeing income stagnation or declines:
In short; student loan debt is rising, and the ability of those not at the highest end of the wage spectrum to pay is becoming more onerous.