Student loans are a manageable problem

Published Jul 14, 2017 at 4:00pm

College students or graduates, or their parents, might find a poll released last week interesting.

LendEDU, a group that tracks the student loan industry, found Millennials -- generally, adults 35 and under -- believe by a 70-30 margin that student loan debt is a bigger threat to the U.S. than North Korea.

Interestingly, despite all of the wailing and hand-wringing that followed President Donald Trump’s withdrawal of the U.S. from the Paris climate accord, just 51.5 percent of those polled identified climate change as a bigger problem confronting America than student loan debt.

The data suggest they are right to think this. According to LendEDU’s report, some 43.3 million borrowers collectively owe $1.41 trillion for student loans, which now are the second-largest consumer debt category behind mortgages, outpacing even credit cards. Sixty percent of college students graduate owing some debt -- on average, about $28,400.

And some struggle to pay it back. About 12 percent of federal student loans are 90 days late or in default -- far surpassing, for instance, the ratio for home loans (4 percent) or car loans (1.4 percent).

Millennials cannot be blamed entirely for this situation, and perhaps we shouldn’t be stunned by the amassed amount of student debt.

In large part the issue reflects the value our society has placed on obtaining a college education, as well as the debt-driven nature of our contemporary economy.

Unfortunately, most students must dive into debt to obtain a degree. And students seeking professional degrees, such as from law or medical schools, must take on much more debt than other graduates. And we get that the job market remains tight, often forcing graduates to take menial employment. But student debt remains a small fraction of consumer indebtedness relative to the mountain of mortgage debt -- $10.6 trillion -- that Americans racked up at the height of the Great Recession. On average, the debt facing a new college graduate is $5,000 less than the price of the typical new car sold in the U.S. -- with much lower monthly payments.

Thus, it seems for many graduates, this is a manageable problem, and the last thing we need is an overreaction, by which we refer to ideas such as the loan forgiveness program advocated by Vermont Sen. Bernie Sanders and others. That sounds nice, but is really misguided.