|
|
|
A rebuttal to student loan horror stories By Morgan Housel
But like any emotion-laced issue, the student-debt story can be prone to hyperbole. My biggest peeve is that most stories covering the issue profile a student with $100,000, or even $200,000, of debt. Read enough of these stories, and you'll think graduating with six figures of debt is the norm.
Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". HUNDREDS of columnists and cartoonists regularly appear. Sign up for the daily update. It's free. Just click here. Hmm. Almost 75 percent of those with student loans owe less than $28,000. Ninety-seven percent owe less than $100,000. The median student loan balance -- the middle level where half owe more and half owe less -- is $12,800.
I don't wish to trivialize $12,800 of debt, or even the mean average of $23,300. If you're unemployed or in low-income work, debts that size can be a big burden.
But let's put these figures into context. The average auto loan amount in 2012 was $19,492, according to credit rating agency Equifax. For a new car, the average loan amount is $25,714.
Why, then, is there so much uproar about the student debt crisis when the average new-car loan is greater than the average student loan? No one ever talks about the "Nissan Altima loan crisis." Plus, the benefits of an education will last a lifetime, and on average demonstrably increase your employment and earnings potential. A car loses value as soon as you drive off the lot.
A few people I've posed the question to have offered reasoned rebuttals. They note that you have to have a car to get to work. True. But a degree dramatically increases your odds of having a job to drive to. The unemployment rate for those with a bachelor's degree is almost two-thirds lower than it is for those with only a high school diploma.
They also note that an auto loan is collateralized by the vehicle. If you can't afford the loan, you can sell the car to help repay the balance. True again. But a car requires expensive upkeep and repairs as it ages. The benefits of a degree compound over time as career opportunities open new doors to promotion and higher wages. College graduates will, on average, earn far more in their 40s and 50s than they did in their 30s, while workers without degrees see much more stagnant (and lower) wages throughout their lifetimes. The "collateral" of a student loan can't be sold, but it tends to appreciate over time.
I think what the student loan crisis comes down to are issues between anecdotes and averages. As long as there are anecdotes of people graduating with six-figure debts and flipping burgers, journalists will write about them with so much passion that you'd think they're the new normal. But they're not. The average college grad is more employable and earns far more than those without degrees, and the average student loan is less than the average new-car loan -- a debt few seem bothered by.
But I won't pretend to understand all sides of this debate. I can just look at the numbers and tell you what I see.
Interested in a private Judaic studies instructor — for free? Let us know by clicking here.
Comment by clicking here.
Morgan Housel, a columnist at The Motley Fool, is a two-time winner, Best in Business award, Society of American Business Editors and Writers and Best in Business 2012, Columbia Journalism Review.
• CONGRATULATIONS: We just saved half a trillion dollars
• End this crazy tax: It will boost the economy
• Medicare: A dangerously good deal
• Economic future looks bright
• The Biggest Threat to Your Portfolio (It's Not What You Think)
• Bond Market Bull Run dead at 30
© 2013 The Motley Fool. Distributed by Universal Uclick for UFS
| ||||||||||||||||||
