August 22, 2016
Centenary University President, Dr. David Haney, recently published an article titled “Three Ways to Consider Student Debt in New Jersey.”
College debt is a problem. But the problem with recent discussions of college debt is that they usually report a large number before which we simply throw up our hands in shock and choose a scapegoat, whether it be rising college costs, decline in state support for higher education, or unscrupulous lenders. Rarely do we step back and look at what those numbers really mean.
Like any statistics, college debt numbers mean different things depending on what questions are being asked.
Graduates in 2016 will owe an average of more than $37,000 for their college educations.
Most discussions of college debt present numbers that represent average debt per borrower, not debt per graduate. The problem is that this excludes all students whose debt is zero, artificially inflating the “average” debt. For example, the highest average debt load in the nation, according to a recent report by NJSpotlight.com, is at Boston’s Berklee College of Music at $86,262, but only 10 percent of students take out loans, which makes the figure relatively meaningless.
At Centenary University, where I am president, the average debt per borrower for those who graduated with a bachelor’s degree in 2015 is $33,821, but because 26 percent of students did not borrow at all, the actual average debt per graduatingstudent is a much lower $25,019.
The other problem is the notion of “average.”
The U.S. Air Force used to make cockpit equipment to fit the average pilot, until they discovered that not a single actual pilot was that average size (so they went with adjustable equipment). Centenary is probably no different from most schools in that the average is often skewed at both ends of the scale by a very small number of students with over $100,000 in debt and a significant number with no debt at all.
So a more useful figure might be the median debt: the amount of debt carried by the graduate in the middle of the pack, with half the class above and half below. (Anyone who has bought a house knows that the median house price in a neighborhood — what the house in the middle of the range is worth — is more meaningful than the average price.) For the same time period (2015), the median debt for all bachelor completers at my institution was $25,000, and it was lower for 2016: $17,750.
I see three mandates here, which are perhaps more important to consider than wringing our hands at New Jersey’s college students as the “ninth most indebted in the nation.”
- Focus on the most serious problem, which is the relatively small group of students who take on crippling amounts of debt.
- Clarify our questions: do we want to know the average debt per borrower, or the much lower average debt per student?
- Raise the question of whether debt itself is the main problem, especially in a state that is rightly generous in offering a substantial Tuition Aid Grant to all students attending both public and private colleges.
I once spoke to a prospective student who told me that if he attended my college, he may have to borrow $25,000, which he said was “even more than I borrowed for my pick-up truck.” I said “OK, your truck will incur maintenance costs and it may last 10 years. Your college education will last a lifetime and, many experts say, can increase your lifetime earning power by a million dollars.”
Few find it unreasonable borrowing $25,000 for a car, so why is it considered unreasonable to borrow the same amount for something far more valuable? According to the Federal Reserve, as of June 2016 there was $1.36 trillion in outstanding student debt, which sounds scary, but there was also $1.07 trillion out there in motor vehicle loans (at generally higher interest rates), and education loans represent about half of the $2.67 trillion outstanding in all non-revolving consumer credit. That $1.36 trillion also reflects a positive trend: that more people are going to college.
College debt is an issue, but let’s think more carefully about exactly what kind of an issue it is.
David P. Haney, Ph.D., is president of Centenary University.
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