Alan Collinge (Student Loan Justice Org.) briefly points out some of the Issues with the Brookings Institution Study as Written by Beth Akers and Matt Chingos
There are what I perceived as problems with the Brookings Study.
Just one example: they base much of their analyses upon “lifetime earnings associated with earning a bachelor’s degree”. The average lifetimes earnings of degree holders is certainly skewed significantly upwards by the top 10% of earners (who account for over 40% of all earnings, and whose earnings have accelerated much faster than the rest of the population since 1989). Remove this group from the data, and average earnings increase is much smaller.
There are many similar instances of cherry picking data too numerous to mention here; but in general terms, the study appears to be doing everything to show that borrowers are not having problems. Yet, the study completely and totally ignores what are probably the best indicators of the borrower’s ability to manage their student loans: the default rates, and the deferment/forbearance statistics. The most recent data (which the lenders go to great lengths to decrease through various “default management” techniques during these temporary windows) show a 3- year default rate of almost 15% (the two-year rate is 10%). The lifetime default rate, which was certainly over 20% for people leaving school in 1995, is certainly well over 30% currently, and could easily surpass 50% for people leaving school more recently. Regarding deferment/forbearance over 40% of all loans are either in default, deferment, or forbearance.
It is very disappointing to see the Brookings people turn into cheerleaders for this structurally predatory lending system. They are not serving the public interest with studies like this, they are actively working against it.
Sigh. I don’t have the numbers at hand but simple experience living in America demonstrates a simple fact: the children of the moderately well-off to extraordinarily well off are EXPECTED to go to College and gain the minimum credential of their respective economic class. The only separator was which college you went to. When I graduated in California in 1974 the really smart kids among the rich went to Stanford, the moderately smart to the Claremont Colleges and USC, while the dimmer ones could be sent to some spendy ‘Liberal Arts’ college somewhere where the only barrier to entry was ability to write a check.
This by the way was a sub-text of Animal House. For the immediately older (than me) generation the key to staying out of Vietnam was simple: stay in college, any college. If you couldn’t hack the work at the best college your parent’s connections could get you into initially just transfer to one down the ladder, and then if necessary down the ladder from that until you landed as a Belushi type C student at a real life Faber College.
But even post-Vietnam getting a BA was simply a ticket that any rich to well-off/professional family sprung kid was expected to get punched. This isn’t to say that a college education at the best University a middle class or working class kid couldn get into, and just as importantly finance, wasn’t the key to moving up into the professional class and for some into the ranks of the truly wealthy. But the fact remains is that almost every kid who was born into those ranks, no matter how dim or undermotivated, was overwhelmingly likely to have some sort of BA or BS. And for ones at the higher end of the income spectrum some MBA or JD/LLD from some third rate business or law school. Because there are ulimited cases of Graduate Faber Colleges out there, if your parents can write a check you can get whatever letters after you name that you want. Including an MD earned on some Caribbean Island.
And that very fact skews any possible analysis. Because this isn’t logic:
Rich kids earn BAs
Rich kids earn higher than median incomes
BAs result in higher than median incomes
Because the middle term doesn’t rely in any meaningfull war on the first term. Rich kids may not match their parent’s life time earning. But generally those earnings will not slip below median unless they are total fuckups. Because there is always a slot in the family firm or the firm of one of the family friends or social affliates. In my State of
California near guaranteed income security can be achieved by having parents wealthy enough to get you into USC and then into a top fraternity. You don’t have to get a ticket to Stanford or Cal-Tech or Harvey Mudd, those are for the grinds. In fact this might even be a hindrance in some cases. Because there used to be a very revealing pharse, one actually embraced by GW Bush:
‘The Gentleman’s C’. That is you didn’t have to be a Summa or Magna at Yale to become a success, at the top level you just had to get in as a legacy and get ‘tapped’ as a ‘Bonesman’. After that life is gravy. And there were similar arrangements in the Ox-Bridge world across the Atlantic. Sure in both cases there were opportunities to excell. But unlike those scholarship kids there was no accompanng necessity.