Which data source or data sources upon which your rely to make your argument is incredibly important to the validity of tha conclusion. Failing to properly account for why the Federal Reserve data is a shaky source for student loan repayment success significantly undercuts the argument recenly put forth authors at the Brookings Institute that student loan debt rhetoric and the facts don’t match up.
Last week, College Parents of America put up this post regarding the Cleveland Federal Reserve data stating that college is worth it. With that post, we made three clarifications:
- If this statement is to be true, graduating is important for obtaining the average outcome.
- The Federal Reserve uses Survey of Consumer Finances to discuss debt levels. However, this is a problematic measure because the survey focuses on households. When narrowing down to the household level, looking at “households aged 22-29 can significantly discount the average sudent debt of a student. Many students who take on student debt may not be head of household for data purposes.”
- Also regarding that same survey, the “measure may overestimate the earnings of all three sectors, as underemployed or underpaid individuals are less likely to head households.”
If one has caught a headline or recent articles about the Brookings Institute report on student loan rhetoric vs reality, one may have missed their main data source. However, if you go to the post on Brookings, it’s fairly explicit. In addition to using the NPSAS from the federal goverment to estimate loan amounts, they rely on the Survey of Consumer Finances.
The authors use the survey to show how repaying loans continues to go well. However, like we said in our clarifications in our post last week, data concerning head of households in repayment are unreliable indicators. This is the boomerang generation (“One in five people in their 20s and early 30s is currently living with his or her parents. And 60 percent of all young adults receive financial support from them.” That’s up from one in 10 a generation ago.). These students are significantly less likely to be a head of household between ages 22 and 40, which is what the report focuses on. And, to make matters worse, 14.7% of borrowers are in default within 3 years. While they may not grab the headline with the shear amount of the debt, it’s certainly not a success story.
In essence, a major flaw in the Brookings approach is that it uses data that are incredibly likely to focus on the subset of those with loans who are doing well in repayment, but then uses that same data to conclude about all students trying to pay off their student loan debt. To play on their headline-grabbing title, this is an example of the rhetoric of Brookings not matching what their chosen data can actually report.
Note: although this post is original, College Parents of America is not the first on the internet to point out significant flaws with this study. For further reading, you may enjoy these articles, which include noticing flaws like ignoring the unemployed:
- Slate: Are We All Overreacting to Student Debt? The answer depends on whose student debt we’re talking about.
- Vox: 9 things people get wrong about student debt
- Consumerist: Not Everyone Has $100,000 In Student Loan Debt, But That Doesn’t Mean There’s Not A Problem