When you want to get your message across, you sponsor a study that is 100% guaranteed to come to the conclusion you demanded from the outset.
In this case, a White House study allegedly proves Student Debt Helps, Not Harms, the U.S. Economy.
Hooray!
The White House just released a big report on student debt that contains all the familiar horrors about for-profit schools, indebted dropouts and students defaulting on their loans. But it has an interesting conclusion: That growing stack of $1.3 trillion in student debt is helping, not hurting, the U.S. economy.
That conclusion is sure to rankle the many student advocates and special-interest groups—from real-estate agents to employers seeking new tax breaks for their young workers—that argue student debt is a big “drag” on the economy. (Hillary Clinton and Donald Trump have each decried the rise in student debt.)
The surge in student debt occurred largely on President Barack Obama’s watch, though it began several years earlier. Since early 2009, when Mr. Obama took office, student debt has nearly doubled, to about $1.3 trillion today, according to the New York Federal Reserve.
Monstrous Report
The 77-page “Investing in Higher Education” report from the White House Council of Economic Advisers backs up its claim that “debt helps” with dozens of charts and studies from economists and academics.
Here are a few examples.
College Earnings Premium
Cumulative Earnings vs. Debt
Lifetime Earnings
Charts Not in Dispute
The report has 77 pages and 45 charts. I do not dispute the charts.
But what do they show?
The problem with the study is it cannot prove what would have happened to those kids had they not gone to college.
Simple Question
Do the college kids earn more because they went to college or because they graduated from high school with an ability to read, write, speak coherent English, and do basic math?
The answer is likely mixed. Those with degrees in engineering, computer science, robotics, law, medicine, etc, likely did far better because of their degree.
But what about the kid with an English degree working as a retail clerk or manager at Target, McDonalds, or Home Depot?
Many of those who did not go to college were not bright enough or motivated enough to get into college.
Straight-up comparisons of those who went to college vs. those who didn’t are flawed.
Report Failures
Let’s assume that college is a good idea. There is still a question of how much college costs and why.
The report did not address unions, athletic coaches making millions of dollars, the massive rise in administrative costs, or pensions.
The report failed to mention Bush’s bankruptcy reform act of 2005 that made student debt non-dischargeable in bankruptcy.
The report failed to mention that costs soar every time government meddles in something.
Median Household Income vs. College Tuition
The report did blame the “Great Recession” stating states cut payments to colleges. It appears the big acceleration in college costs started in 2002 not 2007-2009.
White House Conclusion
College remains an excellent investment overall, and the majority of dollars in the student loan market continue to fund investments with large returns to student borrowers and the economy. However, there is variation in college quality, and particularly during the recession, many students did not receive an education that allowed them to manage the debt they incurred. At the same time, many prospective students have been dissuaded from enrolling in college because of factors like poor information, high complexity, and credit constraints. With a commitment to addressing these barriers, the Obama Administration has enacted policies to lower college costs, improve information, simplify student aid, and cap student debt at a manageable portion of borrowers’ incomes.
Together these policies are a significant step forward in building a federal aid system that supports and encourages all Americans who wish to invest in an affordable, high quality college education to do so. …. To assist in this endeavor, the Department of Education has committed to creating a process that will enable federal researchers to examine loan outcomes at a borrower level. This data will allow these researchers to build upon the analysis provided in this report to better inform policy makers and the public about student debt.
Mish Rebuttal
The study is fatally flawed.
It is impossible to know what percentage of the earnings success of those who went to college is directly attributable to the simple fact that someone went to college.
The majority of those who do not go to college are already failed kids with poor reading, writing, and math skills.
Let’s be honest here. Most of the service economy does not require a college education.
The push to get kids to go to college is a great deal for the debt providers given student debt cannot be dismissed in bankruptcy. College is an uncertain deal to those taking on huge amounts of debt.
Expansion of student aid lending programs is part of the reason costs are rising just as hundreds if not thousands of “affordable housing programs” did nothing but raise the cost of housing.
Obama wants to get out the “facts”. But none of Obama’s “facts” addresses the issues I just mentioned.
The study was a waste of money and the conclusion is flawed. Obama’s self-serving education propaganda continues.
Mike “Mish” Shedlock
Obama is an economic illiterate who is also “in the pocket” of the banks and other parasites. A puppet. What would you expect.
I would argue that the economy would be better improved if college graduates were able to buy homes and invest in their businesses, rather than make payments on a never ending debt, caused by overpriced higher education.
This “study” is to cut off Student Debt forgiveness talk started by Sanders and Elizabeth Warren. The dirty little secret is the lion’s share of the profits made from Student debt(6%!!!! in zero rate environment) goes to…drumroll, NOT BANKS but the Department of Education. DOE is a predatory lender, with “recourse debt” charging 6-7% for a perceived necessity. It’s absolutely criminal and a heist! The Obama Admin wants the DOE to be able to fund all it’s K-12, preschool expenses(of course admin costs) by raping College Students. Government has never been more corrupt and cynical:
http://www.politifact.com/wisconsin/statements/2015/oct/01/elizabeth-warren/uncle-sam-track-make-66-billion-profit-6-years-stu/
You say it’s impossible to know what percent of the increase in earnings is due to going to college. True, but also, you can’t tell what percent of the people who actually come out ahead would have gong to college regardless. Without debt dollars flooding the system, colleges would compete for the best students, lowering costs through scholarships, grants etc – which they don’t need to do since it’s all debt- funded.
Without debt dollars flooding the system, … Dan
Government privileges* for private credit creation mean the banks get to drive the public into debt with the public’s own legally stolen purchasing power.
We should end those privileges in a way that compensates the public.
The Austrian Economists will claim that that compensation is impossible in real terms or that it cannot be justly done, which is why they are part of the problem, not the solution. Something similar to Steve Keen’s “A Modern Jubilee” is what we need, not another Great Depression to “purge the mal-investments” followed by WWIII if history is a guide.
* e.g.
1) Government-provided deposit insurance instead of accounts for all citizens at the central bank.
2) Interest paying sovereign debt such as sovereign bonds and Interest On Reserves (IOR).
3) Fiat creation by the central bank for the private sector such as Open Market Purchases, the Discount Window, etc.
“Do the college kids earn more because they went to college or because they graduated from high school with an ability to read, write, speak coherent English, and do basic math?”
Or do they earn more because new student debt makes its way into the economy and therefore their wages ?
It is as an experiment whose results are affected by the mere fact that they are being observed.
It is a bogus experiment, lacking control groups and statistical validity. Mish summed it up well, pure propaganda. Dept. of Education being tasked to make the case for more debt is corrupt. DoE should be made part of the Federal Reserve and renamed the Dept. of Student Debt.
By the logic of the report: Doubling student debt should double the economic benefits. Tripling student debt should triple economic benefits. Quadrupling student debt should have 400% more economic advantage. The case for ever higher college costs and making student bigger debt slaves is what one would expect from an executive branch ruled by Goldman-Sachs-Obama Inc. An odd sort of socialist paradise, to say the least. No accounting for the taste of the millennials.
“The report failed to mention Bush’s bankruptcy reform act of 2005 that made student debt dischargable in bankruptcy.”
I thought it was not allowed to discharge student loans in bancruptcy?
yes that should say “non-dischargable”
A slave of the state… that’s freedom for the bankers only. Check out the card, now available with the new permanent scratch and sniff feature.
http://cdn.thepointsguy.com/wp-content/uploads/2016/04/chase-freedom-unlimited.jpg
JP Morgan is a felon bank.
http://www.thenewamerican.com/world-news/europe/item/23658-in-bid-for-power-un-communist-offers-obama-a-un-peace-prize
Bush’s 2005 Bankruptcy Reform act made student debt NON-dischargable not dischargable.
The problem is, a college education is now viewed (like healthcare) as a right. So artificial demand is created where a significant portion of the students are either looking for a 4-6 year parent funded vacation, or students that are just looking at college as a status symbol. It is just what you are supposed to do after high school. Or they have been told by the public school system that they can only be successful if they graduate from college. Many are not going to school for a specific degree for a specific job. (Change your major lately?)
This artificial demand along with easy credit does artificially drive up tuition. Those that plan careers that require a college degree end up paying more for the equivalent education of prior generations with less to show for it economically.
educational institutions are eager to charge what the traffic would bear, all backed up by taxpayers and bureaucratized by government
I think maybe the study was funded in part by the Diploma Mill industry. They have spearheaded the commoditization of student debt. Worthless diplomas for all!!
College is now four years of indoctrination to make the graduate politically correct. This motivates much of the liberals’ push for more college students.
Aha , caught you thinking for yourself , anti-social behaviour you know .
How long have you had this attitude and would you let us help you correct it ?
We run an all inclusive policy of progressive adaptation tailored to suit your needs to the benefit of our specific objective.
Welcome on board Robert , you’ll do just fine .
Pls. sign here :
…………………………………………………………………………………..
Looking at the graph, I see the price of a new car is up 97% in nominal terms since 1978?
What is the color of the sky on that planet?
We need to bring down costs. Trim departments and get rid of studies that give no value to society or even have a use when you graduate. At least an art history degree can be used. What do you do with women studies or the myriad of cultural studies degrees. Most of the stuff taught in college today is useless. Colleges are becoming boondoggles for most who attend and this study justifies the gravy train.
Gas attack planed in Philadelphia:
Special education degrees for minority quota fillers are an expensive drain on resources.
Your are all missing the point. If everybody had a Ph.D there would be no unemployment, no poverty, no welfare or income transfers and GDP would jump. And if earning a Ph.D is too onerous, we could accomodate that to lock in the other benefits.
In Ph.D world :
Unemployment = a psychological disorder based on a sentiment of worthlessness that has the effect of driving the sufferer to live under a bridge .
Poverty = self denial and rejection of the physical world that drives the believer to live under a bridge .
No welfare = No more sympathetic platitudes designed to encourage you to remain under a bridge as you will feel at home there by now .
No income transfer = once income transfer is abolished your wages will not make it into your account , as you plan to live under a bridge this is ok .
GDP will jump = GDP was not very clever and climbed onto the bridge while trying to move under it .
Onerous = does not allow you enough time under your favourite bridge .
Accommodate = we know every bridge in town .
Mish, as you point out, correlation is not causation. The real issue for me is DEBT. Debt is a stimulant. It allows people to spend what they do not have…which stimulates the economy, and the debt that we carry on our backs is a stimulant to work possibly harder to pay it off. I know when I was young, i would commit to loans for vehicles that forced me to spend my earnings on payments rather than women and booze and in effect became a savings system of a perverted sort. I was acquiring assets that while depreciating, were directing my income into them as apposed to simply spending it all with nothing to show for it.
The problem with stimulants however is they can create burnout, destroying all motivation to work or pay, and with more and more people realizing debt, both personally and governmental, that will NEVER be repaid, they simply STOP.
I think this is what is currently happening. We have burned out out moral spirit that drives us to work hard and pay our bills, and also our “need” quotient implanted by complete marketing immersion.
We have over consumed, over spent and over committed and are now finding ourselves empty of passion for anything and contempt for everyone and everything. More and more people are simply dropping out, and the government makes it easy by killing our natural productivity through numerous ways, and subsidizing our malaise with entitlement subsidies.
Education has become a lifestyle choice for many and a work avoidance strategy for others. We have a progressive government that is promoting the idea that work, especially for corporations,is evil, and instead inspire the to public service or something that is not connected in any way with production.
Our dying economy cannot absorb infinite overhead and that is exactly what these people represent.
The USA is on the verge of a massive debt crisis. Might seem odd the US dollar would move higher on this news but that is exactly what happened in 2008. “The oddities abound.” For example the USA is niw exporting natural gas to the Middle East. The USA is also exporting oil to Venezuela…a Country on the brink of a famine I might add. I’ve had folks explain to me about what great news a “Super Dollar” is for markets….but I don’t think they know reality very well when they say that. Turkey is lowering interest rates on news of a coup? Yep. Great Britain on news of Brexited? Yep. Only the USA and … apparently Canada…are attempting to normalize rates. This is making sales numbers tough to generate because product pricing is collapsing. That’s a tough environment to be trading equities in. Worse still however is real estate which thrives in inflation and a weak dollar…but not a zero growth super dollar. We now have not only all electric vehicles starting to impact the fuel markets but also autonomous driving which could really be a game changer for productivity and safety. Teslas are so far ahead engineering wise in these two markets they have no competition. Good luck with pricing in the auto space. 1500 hundred bucks for a brand new Chevy sounds about right to me.
Academia ALWAYS votes overwhelmingly for the democratic party candidates. Even when there is a very popular republican, even when there is a popular “independent” / unaffiliated — academics themselves have done study after study that unionized professors do not think, they just pull the democrat lever.
Decades ago, students got an education in spite of their professors leanings. But the last 2-3 decades, college is nothing more than a very expensive indoctrination camp.
90% of the students will not learn any math — it is not a requirement for most majors, and very rarely is it a requirement for “core curricula” (aka job security for really unpopular departments).
“science” for most schools boils down to reading global warming rants and having to say the disproven nonsense is “universally accepted everywhere” — which any real scientist would point out is false. Don’t ask about a control for their political theory — you will get an “F”.
“technology” mostly means using a word processor to write about white privilege nonsense and political correctness.
Then these supposedly intelligent union professors will demand a huge multi-million government grant to study why US students are so far behind in STEM subjects
College was a good deal for a while, but its just overpriced political indoctrination now.
Obama knows not to kick a guaranteed vote in the teeth. Stealing from taxpayers (present AND future) to subsidize union cronies is what Obama is all about.
Congress controls the interest rate on student loans if they are sallie Mae. The interest rate is higher than you would imagine in a zirp world. Congressional members hold shares thus hold rates high and non dischargable. Fox watching hen house syndrome. So why the F**k are we paying for a reverse engineered study as tax payers.
Don’t forget the unemployment rate. If all those students were added to the list, well just imagine.
As many are predicting a major war imminent, the government could waive student fees for service given. If it is anything like the last two world wars, the young would see it as a lark and they know they will not be killed because those that are gunned down in video games always get back up.
Conflict of interest prevents most academics from saying anything negative about educational cost, because that might affect their lofty paychecks. Conflict of interest also prevents the 20,000 economists who work for the bank from saying anything negative against printing, because the printing press pays their salaries.
Research by impartial entities is needed, if accurate results are desired.
Not very impressive here.
You do not dispute the graphs. Those with degrees earn more in their lifetimes, they earn more than they borrow and pay back even with interest.
Yet you some up with things like:
“But what about the kid with an English degree working as a retail clerk or manager at Target, McDonalds, or Home Depot?”
First, how many English 4 yr degree people work at Target/McDonalds? I mean really work there as a career. Not take a job there between ‘real jobs’ or take a job there right after college when it may be hard to land that first gig.
Second, how many are really bankrupted by student debt? Whenever this issue comes up the media is quick to find examples but most students do not have $100K in debt or if they do they have a degree in something other than poetry (a doctor with $100K in debt should be able to have a fine upper middle class life or better).
Third, NPR back in the 90’s had a story about students struggling with debt payments, taking McDonald’s jobs after college as they were unable to find good work. On a lark they came back to them 20 years later. Almost all of them had found good jobs, had paid off or were paying their debt down and were doing well. The media is very biased here because the media relies upon a lot of grunt work from young interns and college grads, to that population student debt is a huge deal but pulling back perspective wise it isn’t.
“The report did not address unions, athletic coaches making millions of dollars, the massive rise in administrative costs, or pensions.”
But you admit that the data shows college adds a lot of value. Err those who add value can and do demand better pay, better benefits and so on. Athletic coaches, though, maybe a bit of a red herring here. At least some college athletics can be viewed as a side business. Are the coaches paid millions from tuition or does the team business provide tens of millions to the college and as a result they pay the coach millions?
“It is impossible to know what percentage of the earnings success of those who went to college is directly attributable to the simple fact that someone went to college.”
This is a copout. There are some people who do better even though they didn’t go to college. There are some who would do as well weather or not they went to college. Some might do better without college (Bill Gates?). But it isn’t just a coincidence that the bulk of the population who went to college just happens to earn more than the bulk who didn’t. It also strains credibility to think millions of individuals just decided to waste all that money only to get something out of it they could have gotten without spending a cent. People are not perfect economic actors but they are pretty good ones.
First, how many English 4 yr degree people work at Target/McDonalds? I mean really work there as a career. Not take a job there between ‘real jobs’ or take a job there right after college when it may be hard to land that first gig.
Instead of asking Mish that question, you should be asking Obama why such data was not in the report.
Do you know how averages work? It’s already in that report.
When you hear the average person with a Bachelor’s makes X amount more than someone with a HS diploma that means average. It includes the HS guy who is’ making $500K a year as well as the guy with a 4 year degree from Harvard pulling in 20K a year. If a large portion of college grads were working min. wage at McDonald’s, you would see that in the averages.
Trust me, don’t worry too much about people with 4 year English degrees. For the most part they do well and often they do better in the long run than Engineer types (engineer types do better immediately out of college).
If there’s any class I think there’s a valid concern about it would be those who take out student loans not for real colleges but for these TV ‘trade schools’ (ala ‘Trump University’ perhaps) which leave them with max. debt but few tradeable skills.
But it isn’t just a coincidence that the bulk of the population who went to college just happens to earn more than the bulk who didn’t.
Not only is it not a coincidence, it isn’t even true. Do you take lifetime earnings – lifetime debt including interest payments, or do you merely take the lazy approach and just look at gross pay? A person making 100K/yr with a debt load of 20K/yr isn’t earning more than a person making 80K.yr. with no debt load.
OK really, a $20K per year payment on student loans? For how long?
http://usgovinfo.about.com/od/moneymatters/a/edandearnings.htm
Lifetime earnings for a college degree is about $1.2M+ more than high school. But what type of borrowing buys that extra $1.2M?
https://studentloanhero.com/student-loan-debt-statistics-2016/
Average student has about $37K in debt upon graduation with yearly payments of about $4-5K, not $20K. Sure your favorite media source will always find examples of the guy with $100K, $200K, maybe even more but the reality is most college degrees cost in debt about what a mid-range, not luxury, car will cost.
“The report failed to mention that costs soar every time government meddles in something.”
Is that the ulterior motive?
Shorter Obama: “There is no such thing as malinvestment. It’s not even a word in Webster’s.”
Also recall that after savaging Bush for wasteful spending, once elected Trump told us that NO spending was wasteful as it was ALL stimulus.
Malinvestment cannot even be defined by those who believe it exists. Whenever they are questioned they end up telling us it’s the same thing as an unprofitable investment.
That college helps you get a better job (usually) and make more money is not something anyone would call a mistaken conclusion. Also, that an educated population is necessary for a democratic republic. I suppose one could argue these are false conclusions but the earth might be flat too.
How the report can claim a huge amount of debt, especially early in life, is a good thing and helps the economy escapes me. I’m in academia, I feel pretty good about claiming that all student loans have done is triple the number of deans and other well paid pencil pushers. True, a few students have gone to college and benefited themselves and society because of student loans, but the resulting explosion in college costs have been a real burden for everyone in general.
States used to pay about 30-35% of a state college’s budget. One third came from tuition, one third came from federal research money for the bigger colleges. Now, states chip in about 15% at most, the difference is financed by students who are forced to take out high interest loans since tuition has been inflated much more than it would have without the loan program.
http://www.pbs.org/wnet/need-to-know/the-daily-need/obama-announces-measures-to-ease-student-loans/12109/
Transcript from the Jul 11 broadcast of “‘I’m A Student-Debt Slave.’ How’d We Get Here? ”
Enlightening show on how we got to this point…