It is Innumeracy Day at the Times as math and common sense get tossed out the window.
Let's start with David Leonhardt of Upshot, who mangles some basic arithmetic in an article about the student loan non-crisis.
Excerpting his key factoids:
The Reality of Student Debt Is Different From the Clichés
...
In fact, the share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades, according to data the Brookings Institutions is releasing on Tuesday.
...
I realize that the stories of student debt are so common and visceral that many readers will view the Brookings argument with some skepticism. So let me walk through it.
The first thing to acknowledge is that student debt has risen over the last two decades. In 2010, 36 percent of households with people between the ages of 20 and 40 had education debt, up from 14 percent in 1989. The median amount of debt — among those with debt — more than doubled, to $8,500 from $3,517, after adjusting for inflation.
However!
The incomes of college graduates have grown since the early 1990s. And the repayment time for many loans has become longer. This combination creates perhaps the most surprising fact from the Brookings data:
The share of income that a typical student debtor has to devote to loan payments is only marginally higher than it was in the early 1990s — and somewhat lower than it was in late 1990s. It was 3.5 percent in 1992, 4.3 percent in 1998 and 4 percent in 2010.
Taking all this at face value we conclude that the number of households with student loan debt has increased from 14 percent to 36 percent, a 250% increase. The debt burden (adjusted for income) as a proportion of income per household with debt has not changed. Ergo, if 2.5 times as many households have taken up this burden then the total payments made by ALL young adults, debtor and non-debtor alike, has soared.
How can that possibly be squared with his bold intro (third paragraph online) that
In fact, the share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades...
It can't. Young adults as a class are spending roughly 2.5 times more on debt service (adjusted for income), which means they have less money available for other things.
If twenty years ago 6 percent of the population had tuberculosis and today it was 15 percent I am reasonably cionfident that Mr. Leonhardt would not assure his readers that there was no public health crisis because the people suffering from TB today weren't coughing harder or any more feverish than the sufferers of twenty years ago.
If twenty years ago 4 percent of New Yorkers had been victims of auto theft and today that figure was 10 percent, I doubt Mr. Leonhardt would argue that there was no problem because the value of cars had only tracked with inflation, so really, nobody had lost more.
Groan.
FWIW the Brookings people manage to summarize this correctly:
Ultimately, Akers and Chingos conclude that typical borrowers are no worse off now than they were a generation ago...
They also note (as summarized by Mr. Leonhardt) that, although the increased prevalence of indebtedness may have macroeconomic effects on, for example, housing, the data is not in to support that.
First?
Posted by: Mark Folkestad | June 24, 2014 at 11:50 AM
Darn, I haven't caught the opening of a new thread in a long time. Now if I can only find the time to keep up with a few of the threads. Of course student debt is mushrooming. Far too many people are going to college these days, the schools are being lavish with their spending and hardly any courses have merit.
Posted by: Mark Folkestad | June 24, 2014 at 11:53 AM
OT already - wanted to repost the Scott Walker article that Jane posted on the last thread. Impressive. I didn't realize he's only 4 months older than I am - yikes.
http://www.nationaljournal.com/magazine/he-shall-not-be-moved-20140618
Posted by: Porchlight | June 24, 2014 at 11:56 AM
Typical borrowers are no worse off now
As if they were in a good place a generation ago, which is not established. Further, a generation ago they could bet jobs to pay the debt. No so today. Then multiply the wonderfulness by 3.5!
Posted by: henry | June 24, 2014 at 11:56 AM
So Obama's latest squirrel is paid maternity leave. Anyone notice that this crap is bouncing out of the White House weekly now? Last week was transgender rights and woobies. This week it's maternity leave global warming.
Posted by: matt | June 24, 2014 at 12:04 PM
Right, paid maternity leave. Gee, what could a company do to get around that? I just can't think of anything.
Posted by: Porchlight | June 24, 2014 at 12:11 PM
Henry/TomM-- I'll throw one more thing into the mix, on the margins but relevant IMO. Pre-1986, a fair number of 'student loans' were discretionary, in that the student didn't 'need' the loan, mom/dad would pay cash, but tax planning said, take the loan, and have mom/dad pay the % and write-off of income taxes. Therefore, 100% of the 35% of currently student loan indebted really needed the loan. Those grads whose parents could pay, didn't take loans (or took out lower principle amounts) as there was no icome tax advantage to parents taking a discretionary student loan. Bottomline-- The Higher Ed/Gov't complex has created a serf class of overly indebted, under income performing victims who now need a bailout. How convenient.
Posted by: NK(withnewsoftware) | June 24, 2014 at 12:11 PM
The Higher Ed/Gov't complex has created a serf class of overly indebted, under income performing victims who now need a bailout. How convenient.
AND an overlord class of administrators (both at colleges and in the government) who are ultimately supported by all those loans. Don't forget them!
Posted by: James D. | June 24, 2014 at 12:22 PM
One more set of numbers. 36% of these Millenials have student loan debt, and 100% of them are on the hook for the $18T (and growing Obummer Debt) plus Soc sec and Medicare for us old guys. HAH... never gonna happen. defaults await, default is a lock... these numbers are at the heart of OPM famine/running out.
Posted by: NK(withnewsoftware) | June 24, 2014 at 12:23 PM
JamesD-- yes, creating the serf class is very convenient for them. The overlords created this deliberately, or at least with reckless disregard for financial responsibility. PLUS the Serfs will pay their government/University pensions... NOT! The Serfs are tapped out, no OPM for those pensions.
Posted by: NK(withnewsoftware) | June 24, 2014 at 12:26 PM
Student loan "forgiveness" is available to those employed by "a federal, state or local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC)," according to the U.S. Office of Education's federal student aid website.
Thank goodness the IRS is trustworthy and nonpolitical.
Posted by: DebinNC | June 24, 2014 at 12:28 PM
Hey, hit got another link from Instapundit to his President Goldman Sachs graphic!
Posted by: DrJ | June 24, 2014 at 12:29 PM
Okay, I'll play the Nostrodomus here and predict universities as we know them don't exist in the next millenial.
Posted by: Jack is Back! (But in Typhus Hell) | June 24, 2014 at 12:33 PM
JIB-universities as we knew them no longer exist for this Millenial. That's simply not widely recognized yet.
Unmeetable Expectations+debt+Few actual skills or knowledge worth more than minimum wage for too many degreed grads
Posted by: rse | June 24, 2014 at 12:56 PM
In my small world, comparing the outcome of a universe composed of certificated morons wearing debt serf collars with the universe of those foolish enough to go into debt in pursuit of a certificate has no meaning. While it's true that certificates of morony are acquired by a higher percentage of those beginning the pursuit than in the past, with current college enrollment at 21 million there were only 1.791 million certifications issued last year.
Lots and lots (technical term regarding statistical precision) of serf collars do not have proper moron tags attached and those lacking proper tags are in much worse financial shape than those who have had their morony certified.
TM does a great job with the rest of the drivel but the pea and thimble maneuver with the initial comparison needed a mention.
Posted by: Rick B | June 24, 2014 at 01:02 PM
Young adults as a class are spending roughly 2.5 times more on debt service (adjusted for income)
This is unnecessarily unclear, TM. More than {who, what, when}?
Posted by: Alan Luring | June 24, 2014 at 01:11 PM
Excellent point as usual, Rick.
Posted by: mad jack | June 24, 2014 at 01:13 PM
Alan Turing,
I understood the predicate to be
. Perhaps TM will respond and clarify.Posted by: Rick B | June 24, 2014 at 01:20 PM
I thought it was crystal clear ~ 2.5 times more people within the category "young adults" have student debt.
Posted by: AliceH | June 24, 2014 at 01:26 PM
OK, I tweaked that passage but the notion was that, whatever the debt service burden borne by young adults twenty years ago, it is roughly 2.5 times larger today. Leonhardt's view that even if it is 2.5 times larger it is not a problem because 2.5 times as many people are making payments is dubious.
Posted by: Tom Maguire | June 24, 2014 at 04:22 PM
Colleges and universities have become little more than a credentialing system. Since intelligence tests were outlawed, companies needed something to sort out the brighter, more assertive people from those less so. That system never worked well. Now, with the possible exception of STEM, it hardly works at all. If someone (the College board?)were to come out with a more useful credentialing system, our higher education system would likely collapse under it's own weight.
Posted by: Buford Gooch | June 24, 2014 at 04:31 PM
Thanks for the clarification!
Posted by: Alan Luring | June 24, 2014 at 04:33 PM
College costs and funding mystify those of us in the system too. Here in my state there are to be NO raises for faculty and staff but tuition is going up anywhere from 4 to 8%, We don't know where it goes or why either. On the other hand, free CC (no tuition) starts soon, so the fate of 4 year schools is up in the air
Posted by: surbuban gal | June 24, 2014 at 04:50 PM