Student debt and the value of college

History majors go to law school. Psychology majors go into social work. Music majors teach.

We know this because the American Community Survey recently began collecting data on college majors. Ben Schmidt, an assistant professor of history at Northeastern University, used the survey’s data on the 30 most common degrees and the 40 most common professions to create a giant interactive graphic last year on what Americans have actually done with their degrees.

Students aren’t just taking on more student loan debt than ever before — many are still struggling to pay it back when they leave college. And while the economy is getting better, student loan delinquency and default rates aren’t.

This isn’t what you’d expect. It’s natural that people start to fall behind on debt when the economy is in a recession. As the recession worsened, delinquency rates climbed for people with all kinds of consumer debt. Eventually, though, as the economy improves, what goes up should come back down.

The Education Department has argued over and over that people shouldn’t judge a college rating system that doesn’t exist yet. But much of the data in its current database, the Integrated Postsecondary Education Data System, or IPEDS, is self-reported and the penalties for inaccurate numbers are fairly vague (“administrative action” from the Office of Federal Student Aid), according to the department’s handbook for the college employees who fill out its surveys.

Thomas’ article also suggests that if the rating system gains any traction, some colleges are likely to embrace it as a marketing tool — with the attendant consequences:

Somewhere in the US Education Department, statistical experts and policymakers are at work on a highly controversial idea: a federal system to rate colleges based on their quality, much as Consumer Reports rates refrigerators.

Many colleges hate this idea, and it turns out the uproar is nothing new. The forerunner of the modern Education Department tried a similar idea in 1911. At the time, colleges opposed the federal quality ratings so bitterly that two American presidents eventually intervened to halt their publication.

Study after study has shown that graduates of elite colleges tend to earn more later in life. Does that mean their sticker price of up to $60,000 per year is worth it?

Economists have researched this question for decades, and the answer is surprisingly complicated. In general, the better the college, the more money graduates make later in life. But because elite colleges are filled with academically talented students who disproportionately come from wealthy families, it’s hard to disentangle cause from effect.

A strong majority of American families don’t think students’ should have to foot the entire bill for their college education, a new national survey shows. One in 5 families said the student should be solely responsible for paying to attend college.

But the survey, from student lender Sallie Mae and market research firm Ipsos, found both parents and students were unselfish when it comes to the more than $20,000 the average family paid to attend college. Students were more likely to say that students should pay for college, and parents were more likely to say that parents should pay:

President Obama’s higher education agenda has had trouble attracting supporters from either party in Congress so far. But he appears to have at least one rhetorical ally in the House of Representatives: Rep. Paul Ryan.

That doesn’t mean Ryan, a Wisconsin Republican, will be supporting Obama’s higher education proposals anytime soon. But Ryan’s new plan to fight poverty reveals that the the two very different politicians have some common ground in their approach to colleges and universities.

The economic return on investment for a college degree has never been higher. But the more that fact is discussed, the more some pundits seem to think the US is at risk of an epidemic of unnecessary college-going that can be averted by singing the praises of highly skilled trades.

The latest, in Businessweek, is headlined “Let’s Start Telling Young People the Whole Truth About College” — the whole truth being that a four-year degree isn’t the only road to a stable, even lucrative, professional life.

This, from Sandy Baum’s February report on the college lifetime earnings premium, is a really important point:

Criticisms of increased spending on financial aid, for example, often argue that too many people are going to college in the first place, and that the US should beef up its vocational training programs for high-wage skilled jobs that don’t need a four-year degree.

College graduates in the class of 2008 had it rough. They started college when the economy was thriving and took on more student loan debt than anyone before them.

Then, they graduated just as the Great Recession rushed in. The Class of 2008 was blindsided by an economic reality that they hadn’t planned on and weren’t prepared to handle.

President Obama, among others, likes to say that the US has the “world’s best universities.” That claim, though, refers the tip-top of prestigious universities: The US has 11 of the top 15, according to one international ranking.

So how good are US colleges overall, really? Kevin Carey, the director of the New America Foundation’s education policy program, recently argued in the New York Times that they aren’t that great, given that American adults — even college graduates — don’t perform well on an international test of adult skills. And Education Secretary Arne Duncan said Wednesday night that he generally agrees.

Student loan interest rates went up July 1 for the academic year that starts this fall. But unlike last year, there’s no political uproar: Congress intended this to happen.

Student loans for undergraduates will have an interest rate of 4.66 percent, up from 3.86 percent last year. For graduate students, the interest rate on Stafford loans will be 6.21 percent, up from 5.41 percent.

As told to the National Association of Student Financial Aid Administrators:

Update: the Education Department says it’s not so:

On Tuesday, the small community of writers who like to argue over student debt went to war.

The opening salvo was a Brookings Institution report that argued student debt is no more of a burden now than in the past, and that anecdotes of graduates loaded down with six-figure debt are far from typical.

House Republicans released an 11-page white paper Tuesday on their vision for reauthorizing the law, which expires at the end of this year but will remain in effect until Congress gets around to rewriting it.

The Senate proposal focuses on easing the burden of student loan debt, plus holding for-profit colleges accountable. The House proposal adopts some of the recommendations that outside groups have urged to help students complete college, mostly the less controversial ones, and calls for rolling back most of the Obama administration’s regulatory agenda on higher education.

Here is everything the internet wrote on June 24 about whether student debt is as bad as you think it is:

Full disclosure, since this is clearly a contentious topic: Matthew Chingos, a co-author of the Brookings study, lent me a turkey pan at Thanksgiving despite mostly knowing me from higher ed policy Twitter. Unfortunately, I keep forgetting to return it, so if anything, he is beholden to me and not the other way around.

The Wall Street Journal looks at the debate around student debt and home ownership, noting that student debt is at historic highs and home ownership among under-35s at historic lows.

This is the most interesting chart from the WSJ article:

For the first time in more than 150 years, freshmen at Cooper Union will face a tuition bill this fall. For a college that has historically been free to undergraduates, the policy change is huge and controversial.

But they’ve found the rosiest possible spin. Cooper Union says on its website that it’s actually being very generous: All new students are getting a $20,000 scholarship to offset part of a $39,600 tuition bill!

The headlines about student loan debt often feature people with loans over $100,000. But student debt for a typical household looks somewhat more manageable, at least among people who are already paying back their loans.

The Brookings Institution looked at data from the Federal Reserve Bank of New York on household finances: The median, or typical, household with debt owes about $160 per month — about 4 percent of their income — and has $13,000 in debt to pay back.

President Obama is proposing two plans today to make the burden of student debt a little lighter for some borrowers.

He will expand a program that lowers student loan payments to 10 percent of borrowers’ monthly discretionary income. And he will call on Congress to pass a proposal from Senator Elizabeth Warren to allow some borrowers to refinance their loans, whether those loans were made by banks or the federal government.

But these accomplishments are invisible to the federal government, who won’t count any of these students — or thousands of others — when it calculates the most widely circulated college graduation rate.

Fifty-nine percent of students at four-year colleges earn a degree within six years. That’s the national version of the measurement colleges are required to use for their own graduation rates according to a 1990 federal law.

Ben Schmidt, who created the amazing interactive chart on college majors and careers, has a warning for those who would evaluate a degree based on salaries: Mind the gender wage gap.

The difference between what men and women earn in different fields can lead to some skewed results. Schmidt just wrote a blog post more fully explaining this; here’s an example of the kind of error he’s afraid will be common:

Brookings’ David Wessel tweeted this chart from Goldman Sachs on why student debt went up. Was it because more students were going to college, because tuition was higher, or because students were taking out bigger loans? It’s all of the above — in pretty equal portions.

The paper this is from is paywalled, but if I can find it I’ll follow up.

One reason the Education Department is planning to rate colleges on affordability, quality and value: It’s something the department can do without Congress.

Well, mostly. Rating colleges, along with everything else the Education Department does, needs one thing from Congress: money.