The misleading world of student debt and college cost statistics

As a frequent writer on student debt and college cost issues, I have become acquainted with a standard set of misleading and useless statistics. Here is a handy guide to the most frequently used.

$1 Trillion Student Debt
In spring of last year, the Consumer Financial Protection Bureau estimated that US borrowers collectively held $1 trillion in student debt. The first problem with this number is that it may be wrong. Around the same time, the federal reserve estimated the student debt total at $870 billion. But the bigger problem with this number is that it is totally meaningless standing alone. Writers exploit our base-10 number system to sensationalize student debt by throwing this figure around by itself without any other context. How are we supposed to know what this figure means? Is that a lot of debt? How much aggregate debt is a lot? How many people is that debt total distributed across? Debt totals could be rising because more people are attending college, not because average indebtedness is rising. This could go on and on, but the bottom line is that large round aggregate figures like this are completely uninformative by themselves. When you see them, it is usually a reliable sign of dishonesty.

College Tuition Inflation
Writers often talk about soaring college tuition. Since 1992, college tuition has more than tripled according to the Consumer Price Index. However, it is widely known that the CPI’s figure is wildly inaccurate. The CPI tracks the sticker price of college, but almost nobody pays the sticker price. A better estimate of tuition is net tuition and fees (i.e. tuition and fees after grants). The College Board has net tuition data going back to 1992. According to that data, over the last 20 years, net tuition at four-year public universities has increased 51.6 percent. At four-year private universities, net tuition has increased 33.7 percent. Don’t get me wrong: there is plenty of room to complain about these cost increases. But the actual increases are just a fraction of what many people suggest.

Average Student Debt
Writers often cite the Project On Student Debt, and claim that college students graduate with an average of $26,600 in student debt. There are a couple of problems with this. First, this is not actually an estimate of average graduate debt; it is an estimate of the average debt of graduates that have any student debt at all. One-third of students graduate with no debt at all. If you count their zero debts into the average, it falls to $17,733. Second, median student debt — not average student debt — is the best measurement if the goal is to communicate the typical student debt burden. As far as I can tell, the Project On Student Debt does not publish a median debt estimate, but the Federal Reserve pegs median student debt at $12,800 (although this figure is not contained just to recent graduates). The problem with using averages is that a small number of students graduate with monstrous debts, and those debts dramatically pull up the average. That results in a distorted average that is not representative of student borrowers in general.

These are just the top three frequently misused statistics in the student debt and college cost debate. This debate also often suffers from an inadequate appreciation of college price discrimination (poor students pay around half of what rich students pay) and a misunderstanding of the distribution of student debt (richer households tend to hold the most). If we are going to have a serious discussion about college financing, we need to make sure that the data we use is accurate and relevant. Far too often, that is not the case.