Why Debtors With the Smallest Incomes Have the Larger Problem

…Is how The New York Times meant to title Susan Dynarski’s Upshot piece, which was instead titled, “Why Students With Smallest Debts Have the Larger Problem.”

The article makes other odd or incorrect statements. For example, it says that 7 million borrowers are in default, but looking at its sources that probably includes some debtors who have both direct student loans and guaranteed student loans. (The link in the article doesn’t help.)

It then claims that debtors with high debts are less likely to default because they tend to be high-income professionals. In fact, those debtors are more likely to be sophisticated enough to sign on to a hardship deferment when trouble arises, or more commonly use IBR and its friends.

The statement also commits what’s rapidly becoming the cardinal sin of student debt reporting: using debt as the independent variable and not income. People can’t decide how much money they make, so if they have high debts, then they’re hosed. It’s not all sunshine and roses for high-income, high-debt workers either, as the interviewees from The Wall Street Journal illustrated a couple weeks ago. Debtors with small balances and high incomes don’t default on their loans.

I won’t beat up on the piece too much. Its main point is that the average defaulted balance is fairly low, and given that I regularly report on that as the student debt crisis, I acknowledge that the NYT has gotten to the right place despite some staggering. It’s also correct to say that reducing balances won’t reduce defaults, as the author states.

One thing that will reduce defaults is increasing borrowers’ incomes and discouraging people who have little chance of completing college from attending. The latter policy, of course, contravenes the well-established view that everyone can get ahead of everyone else simultaneously thanks to credentials. Instead, the author argues for extended, income-based repayment, which essentially normalizes default—but we won’t call it that.

Someday the media will discover that job creation and higher pay will reduce defaults, but that day is still a long way off.


  1. Do not go to law school. Take it from a 25 year solo veteran. There is no work and thousands of attorneys like me roaming the country hunting for clients. In Illinois alone, there are 91,000 attorneys and only 55,000 Walmart workers. I heard that for every attorney posting, employers receive between 400 to 1000 applications. You have a better chance at becoming an astronaut with those numbers.

  2. These blogs do little to mention IBR or the other safety programs that exist. Look at Brooklyn Law, which now offers a partial refund for those who do not do as well and find jobs after graduation. I graduated with almost $300,000 of law school debt and decided law was not for me. I took a low paying job. Was law school a mistake? Sometimes I think so, but other times I realize it did teach me a lot. Would I be here if I did not go to law school? I don’t think so – but I doubt it. And, had I not gone to law school and moved to the east coast, I would have never had my daughter, so I have to consider that.

  3. What about the roughly 50% of people who start college but drop out (I think its about half). Do they gain a significant advantage from their partial education? If they don’t then it doesn’t support the Everyone Go To College mantra pushed by some economists. It would mean college degree is largely a positional good, so more people getting degrees is going to have diminishing returns. It would also mean going to college isn’t an unqualified good idea, because it you should happen to drop out and never complete you will probably be worse off than if you had never attended.

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