Line-by-line rebuttal of Robert Applebaum’s student debt comments

Robert Applebaum, creator of, has positioned himself as an authority of sorts in the student loan debate. I came upon his editorial in The Hill today, and I was frankly surprised by just how misleading and incorrect much of his argument was.

Applebaum first identifies what he believes is the culprit of higher tuition:

With the availability of so much seemingly “free money” available to anyone with a pulse who wants to take out a student loan, colleges and universities have had no incentive to keep costs down – and they haven’t. The outrageous costs of obtaining a college education or beyond today have very little to do with the inherent value of the degrees sought; rather, it has much more to do with brand new stadiums and six-figure administrative salaries.

Much of this is not true. The Delta Cost Project has the most comprehensive run-down of rising tuition costs I have seen so far. The first thing we have to do is separate public schools from private schools. As the report details and as Catherine Rampell explains at the Times, the tuition increases of public institutions are almost entirely driven by a decrease in state subsidies. As subsidies and other non-tuition revenue decline — both of which happen in economic downturns — public schools turn to raising tuition to make ends meet. So, it is not too much easy government money that is causing the rise in public school tuition; it is the opposite.

For private schools the story is different, but not in the direction Applebaum suggests.

As you can see, the changes in spending are pretty similar across the board for everything but public service, which has actually declined, and student services, which has exploded. Student services refers to things like admissions, registrar services, career counseling, financial aid offices, student organizations, intramural athletics, and cost of recruitment. Operations and maintenance — where big capital expenses like stadiums would show up — are basically in line with other spending. Academic and institutional support — where administrator salaries are reflected — are also basically in line with other spending. If we are going to blame any one type of spending for rising tuition, it would be student services, not the favored punching bags of sports stadiums and university presidents.

Finally, to the extent that students are not putting downward cost pressure on universities because of easy credit, how on earth would bailing out student debt holders make that any better? If anything, it would make it worse.

Applebaum continues:

After all, if the degrees obtained today were worth the increased cost to obtain them, compared with 30-40 years ago, then shouldn’t those degrees also yield greater salaries upon graduation? […] Gone are the days when tuition rates had any kind of rational connection to the salaries one could expect upon graduating. […] In fact, they’re worth far, far less than in years past, precisely because of the high cost of tuition combined with the decimated job market where middle class wages have gone down, not up, over the last decade.

The suggestion here is that graduates do not receive greater salaries than they did previously. But they do. According to a Georgetown study on college wage premiums, the estimated average lifetime earnings of those with bachelor’s degrees in 1999 was $2.7 million. In 2009, it was $2.8 million. In 1999, people with bachelor’s degrees were estimated to make 75% more than those with just high school degrees. In 2009, that number had grown to 84%. There is variation in just how well graduates do, which is why I suggest we implement an income-based repayment system. But on average, the college wage premium is growing alongside tuition, despite what Applebaum says.

Applebaum goes on:

How do we ever expect the housing market to improve when the very people we rely upon to purchase homes – college grads and professionals – are graduating with mortgage-sized debts that they can neither live in, nor use as intended in today’s job market? […] And who’s going to be buying cars, starting businesses and making investments in our future if not the middle class?

Here Applebaum argues that student debt forgiveness would be good stimulus. It would not. Curiously, Applebaum hates debt, but says we should forgive it so that people can undertake more of it. If Applebaum wants to stimulate the economy by injecting $1 trillion into it, the best place for that injection is among poor people, not student debt holders, most of whom are not poor and are just as likely to save the windfall as they are to boost their consumer spending with it.

Finally, Applebaum gives us this:

Are we content to live in a society where only the privileged few are able to obtain an education without sacrificing their future?

We already live in a society where only the privileged few are able to obtain an education period. The sacrificing the future part has nothing to do with it. The reason higher education is skewed heavily to the wealthy is because of the immense social neglect visited upon poor kids aged 0-18. At the point of high school graduation, low-income kids are significantly behind their high-income cohorts, which accounts for their lower higher education rates. That is where the class problem in education is, not student debt at college.

Further, those with the highest student debt are those who have top 10 percent incomes, and student debt in general trends towards the upper half of the income distribution. This story about masses of poor kids going into high debt is just unfounded. Only 3 percent of students in tier-one universities come from the bottom quarter of households. If you wanted to open up college access to poor kids, you would direct this $1 trillion towards them and their families before they turn 19, at which point they are generally too unqualified to access good colleges anyways.

I understand that a non-trivial number of people want to give $1 trillion to student debt holders. I also can see how that has some gut appeal for some. But the arguments coming out in favor of it are transparently post-hoc. The proponents conclude that they want to forgive student debt and then work backwards to find some sort of rationale for that conclusion, whether one exists or not. Applebaum strikes me as one of those people, sadly enough.