How to Falsify the Bennett Hypothesis

The Bennett hypothesis asserts that colleges and universities absorb increases in federal student aid and pass them back onto students as higher tuition charges. Put differently, the hypothesis states that the quantity of higher education is inelastic (insensitive) to its price, so higher-education institutions collect subsidies to students as rents instead of expanding enrollments. Importantly, the hypothesis does not in itself explain why colleges and universities absorb federal student aid (contrary to what its namesake might have believed); it merely offers the mechanism. I regularly cite the hypothesis as a guide to understanding the relationship between the federal-student-loan program and law school costs and debt.

As stated, the Bennett hypothesis is easy to falsify: Find examples where increases in federal student aid did not correspond to higher tuition charges, or show that those subsequent higher charges were due not to the government’s intervention but other factors. Time sequence, correlation, and non-spuriousness. There is a contentious literature on this topic.

Via TaxProf, I see that a research paper, “An Empirical Examination of the Bennett Hypothesis in Law School Prices” (“Empirical Examination”), attempts to test the Bennett hypothesis on private law-school tuition costs. The paper’s author, Robert Kelchen of Seton Hall University (not the law school), argues that he finds no empirical evidence of the Bennett hypothesis’ effects. I believe “Empirical Examination” arrives at unsound conclusions because it mischaracterizes the Bennett hypothesis, and it insufficiently addresses the dynamic history of legal-education financing since 2005.

(I note that “Empirical Examination” is published via AccessLex, which is related to Access Group, the erstwhile private student-lending organization that financed many law students’ legal educations before the advent of Grad PLUS loans.)

Mischaracterizing the Bennett Hypothesis

“Empirical Examination” poses two research questions that mischaracterize the Bennett hypothesis:

(1) Did tuition/fees or living expenses for law school students increase at a faster rate following the creation of the Grad PLUS program in 2006 and the expansion of income-driven repayment in 2007?

(2) Did the student debt burden of law school graduates increase at a faster rate following the creation of the Grad PLUS program in 2006 and the expansion of income-driven repayment in 2007?

These questions appear to assume that the Bennett hypothesis is disproven by discovering a lower rate of increase in law-school costs and student borrowing, as though law-school cost growth can go on indefinitely. This is unscientific. “Empirical Examination” cites no formulation of the Bennett hypothesis discussing growth rates in costs and borrowing, I know of none, and I don’t think any would be correct.

Rather, the way to test the hypothesis empirically is to take away Grad PLUS loans from students at some law schools and not others. If costs and borrowing stay the same at the Grad PLUS-less law schools, then that tends to discredit the hypothesis. In fact, “Empirical Examination” cites a study that conducted a similar test of for-profit colleges and found “some support” for the Bennett hypothesis. For law schools, the closest test case is Charlotte Law School, which lost its access to federal loans earlier this year. There is no Charlotte Law School anymore, and while this may or may not be related to federal loans, it is congruent with the Bennett Hypothesis.

The History of Law-School Lending Is Consistent With the Bennett Hypothesis

“Empirical Examination” understands correctly that around 2004, law students could borrow money from the federal government and private lenders. However, thanks to a rapid series of changes, law students could borrow all of their cost of attendance plus living expenses from the government without any private lenders (whose loans became mostly nondischargeable).

A theoretical examination of Grad PLUS loans with regard to the Bennett hypothesis would compare these changes to a hypothetical baseline without them. For example, one could try to find similar situations today in which a lender would offer an unsecured consumer loan of around $100,000 at 7 percent interest for three years. I lack the finance background to perform such an estimate, but intuition suggests the answer is not good for skeptics of the Bennett hypothesis.

To illustrate, in 2005, Seton Hall University School of Law charged $32,620 for full tuition to full-time students, and law students could borrow only up to $18,500 in federal loans, leaving them to generate the extra $14,120 (43 percent of the cost). Last year, Seton Hall charged $52,022 to full-time students. Under the pre-Grad PLUS loan system, law students would need to cover $33,522 (64 percent of the cost). I doubt private lenders would be so willing to cover more than $100,000 in unsecured loans after three years of legal education, especially given law students’ repayment prospects.

Other Weaknesses in ‘Empirical Evidence’

There are other problems with how “Empirical Examination” explores the Bennett hypothesis and legal education. For one, its focus on the increase in the rate of charging and lending ignores the fact that demand in legal education has plummeted. Last year, Seton Hall received only 1,387 full-time applications, about half as many as in 2007 (2,638). The Bennett hypothesis addresses the supply-side of education, assuming demand is constant, but when demand falls on its own, then you have law schools teetering financially. As a result, assuming demand for legal education had been constant for the last decade, it’s possible that the rate of increase in cost and debt would have continued at their pre-Grad PLUS loan pace nonetheless.

“Empirical Evidence” also discusses how many law schools funnel their revenue to parent universities. This phenomenon, certainly greatly diminished today, is also consistent with the Bennett hypothesis. If law schools were not absorbing tuition as rents, then these transfers would be unsustainable—again, assuming demand is constant. Similar arguments can be made for zero-sum tuition discounting and the dysfunctions in the law-student transfer market.

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To conclude, “Empirical Examination” does not challenge the Bennett hypothesis as it applies to law schools. It mischaracterizes the hypothesis as predicting an increased growth rate in costs and borrowing, which implicitly assumes that growth in those measures is natural when they should reach a limit at some point. “Empirical Examination” does not address facts in the history of legal-education finance tending to show the Bennett hypothesis is correct.

2017-10-02 Site Update

Those interested in Student Debt Data can find it in the link.

The changes are not substantive, so if that doesn’t excite you, then listen to Sleaford Mods instead.

Fin.

2016: The Middle-School Premium Returns With a Vengeance

Mid-September, the Census Bureau publishes its Income, Poverty, and Health Insurance tables for the previous year. I spent a few hours combing through the latest update to see what they say about young people’s incomes by education level. Going back to 1991, the data tend to validate my position that college education is not raising people’s earnings with human-capital superpowers. This can be shown by observing how more people go to college while their aggregate income isn’t rising.

Okay, well, it rose a little bit this year.

Here’s the table comparing income growth by education level for people in the 25-to-34 age bracket. It’s the mean average of the annual growth rates of both aggregate earnings and per-capita earnings. We want college grads’ per-capita earnings to be growing at least as fast or faster than their aggregate earnings because it would show that the population effects aren’t being swamped by human-capital effects. Alas, they are.

In most years, high-school graduates’ incomes have risen more per capita than college grads’. Over a prolonged time period, this doesn’t bode well for college graduates.

But this year—whoa! Dig those less-than-9th graders! They received a more than one-quarter wage hike! When was the last time you got a quarter raise? Long live the middle-school premium!

Yes, this last one is horse-race reporting with erratic data, but until the consensus acknowledges that college is not producing positive outcomes in the aggregate, I’m not apologizing.

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Past coverage:

• “Everything I Needed to Know: The Middle School Premium” (October 10, 2015)
• “More Education ≠ More (National) Income” (October 9, 2014)
• “High School Grads Get a Big Raise, College Grads? Not So Much” (September 20, 2016)

A Retrospective on Obama’s Higher Education Accomplishments

“Obama” appears in 38 of the 641 posts I’ve published on this site since it began in May 2010. A few weeks before he left office, I threatened to investigate what I’d written about him or his administration over those six-plus years. The short answer is that if you didn’t know any better, you’d’ve thought this author was a Bernie Bro.

But I do know better, and no, I’m not a Bernie Bro, but my thoughts on the 2016 election are for another post. Until then, I can’t argue with much of what I’ve written about Obama.

Consider this gem from, “Bucket, Meet Drop, or Why We Shouldn’t Tolerate Electoral Sunk Costs,” October 27, 2011:

This is what I mean by “electoral sunk costs”: It’s one thing to wake up one morning and realize you’re wedded to policies that sell jet-setting globalization but in reality force people to reduce their life expectations to McJobs. It’s another thing to go out and campaign on, “This country has been wrecked by kleptocrats. Time for the rich to ‘suffer’ painful reforms, and pay no attention to the fact that we just spent four years on hope and change and delivered neither.”

A weasel hath not such a deal of spleen as I am tossed with.

In faith, I don’t disagree with this position. “President Obama squandered an opportunity to be the FDR voters hoped he’d be,” I would write a few weeks later, and indeed, in higher education Obama was no visionary.

Here’s a summary my writings on Obama’s statements or his administration’s actions on higher education and student loans. The order is non-chronological.

• College for all

I wrote a few posts on Obama or his administration’s overall higher-education agenda. Apparently, in August 2010 he said, “[Higher] education is the economic issue of our time.” (The White House has taken down the transcript. Hm.) He reasoned that because unemployment was double for non-college graduates than college grads, and that eight in ten jobs over the next decade would require workforce training or higher education, we needed to send more people to college. How the Great Recession suddenly made all these workers redundant escaped him; so much for aggregate demand.

He didn’t budge from that position. In “‘Hope and Change,’ Meet ‘No Hope, Cosmetic Change’” (February 19, 2013) I found that Obama’s Treasury Department and Education Department joined forces to argue the economic case for higher education. Treasury and ED believed that skill-biased technological change was forcing people out of work, even though the Labor Department projected more job growth in lower-wage service sector jobs than skilled ones. Labor productivity hasn’t gone far in the last decade either.

Obama even walked back the “Eight in ten” line a year after he made it. By 2011, only 60 percent of new jobs over the next decade would require more than a high-school diploma. I traced the source of that statement to a paper by the Georgetown Center for Education and the Workforce, which warned that by 2018—next year!—the U.S. would be short 300,000 college-educated workers. The paper dismissed pessimistic estimates of Labor Department data showing that tens of millions of college graduates are and would be “malemployed” because they worked in jobs that don’t require any real education.

• Promoting income-driven repayment (IDR) plans

If there’s one thing that’s driven me nuts about writing about student loans is all the names that the government and journalists gave to IDR plans. To this day I still casually refer to them as IBR, but after the administration created Pay-As-You-Earn (PAYE), then REPAYE, and then distinguishing ICR from PSLF, it got exhausting. The salient point though is that under Obama, the government created a bunch of improved repayment plans, and promoted the existing ones that the earlier W. Bush government made.

Naturally, critics—mainly The Wall Street Journal and the New America Foundation—attacked the plans’ loan-forgiveness features and then raised alarms over the administration’s success at enrolling debtors on them. For example, in, “WSJ: Big Numbers Divided by Small Numbers Yield Large Percentages,” I made fun of the publication for its slant against student debtors. Primarily the criticism of IDR plans focuses on graduate- and professional-school debtors who are certain to obtain high-paying jobs and therefore need IDR plans—to say nothing of PSLF—least. These outlets almost never separate the problems of IDR plans from the odious Grad PLUS Loan Program, which is responsible for graduates’ high debt levels in the first place.

Obama’s myopia on the value of college education was offset by his recognition that student debtors were hurting. Relying on a legislative framework created by his predecessor, the result is a cumbersome system (for debtors) that prevents widespread defaults and more Occupy Wall Street-type protests. At one point, he even proposed a budget that would change how the tax code treats forgiven loans.

• The “gainful employment” rule

The Department of Education began working on the “gainful employment” rule early in Obama’s first term. Frequently criticized as unfairly targeting entrepreneurs, the rule attempts to ensure that for-profit colleges don’t exploit the federal loan system. It’s too bad federal law doesn’t authorize this kind of accountability toward all institutions, because if the “gainful employment” rule were applied to all law schools, many of them would fail quite quickly and a majority would be in serious trouble.

• Ending the Federal Family Education Loan Program, buying up student loans.

One of the Affordable Care Act’s smaller cost-saving mechanisms was eliminating the program that guaranteed education loans by private banks, which are not to be confused with totally private loans. The program, which was the mainstay version of federal lending for decades, was a great way for banks to make easy profits. By socializing student lending, the government saved many billions of dollars, and made direct loans the only federal option for student debtors.

The Republican Party’s platform is to bring it back.

I discussed the ACA part here, but I think the numbers might be wrong because I didn’t consider that the government was buying up guaranteed loans, turning them into direct loans. This action is what will set the stage for many people shrieking that the government would lend $30 trillion by 2030 and more importantly a future write-down of the loans outstanding. Debts that cannot be repaid, won’t be. The only question is whether the write-down occurs through IDR mechanisms or something new. Here is where Obama kicked the can down the line to his successors.

• Undoing subsidized loans for grad students, floating student loan interest rates

One result of the pointless debt-ceiling fight in 2011 was taking away subsidized Stafford loans from graduate- and professional-school students. Ultimately, it cost a new law student about $3,600 in payments.

I’m unsure if it was related to another government crisis, but Obama also signed legislation that floated student loan interest rates. The rates are based solely on the whims of the bond markets every spring. Nevertheless, the legislation has benefited borrowers because interest rates have been lower than the fixed statutory rates in the days of yore. In 2016, graduate/professional Stafford loans and Grad PLUS loans were about 1.5 percent lower than the fixed rates. This will save debtors money in theory, but if rates rise, they’re hosed.

• The two-year law degree

In summer 2013, Obama even weighed in on legal education, which indicated either the coverage the topic was receiving or his interest as a former law professor. It was a throwaway statement, but I teased him for it in, “Obama Favors Law Graduate Underemployment, Poverty Wages.”

• Arne Duncan

Finally, I add that I expected Arne Duncan to find a warm seat at the Lumina Foundation after he stepped down as Secretary of Education. Apparently, he defied this expectation, and he’s working with troubled Chicago youth. Good for him, but I still think he was incompetent because he egged Obama on with his college-for-all dogmatism.

Conclusion:

Obama made the typical student debtor better off than when he left office—but not by much. Some superficial changes and policy nudges lowered debt burdens and eased repayments, but much of it was incidental to his other objectives.

In light of the 2016 election, what disappoints me most about Obama is his 20th century attitude towards sending everyone to college. I can forgive Sanders, Clinton, and possibly Trump for believing college is the answer. These candidates were the dead hand of the pre-Reagan America trying to fit obsolete policies around new problems. But Obama is younger than these people, and it only makes him look even more like an out-of-touch ivory tower intellectual. Underemployment is still around in 2017, and more self-inflicted political crises will push student debt further down the agenda, so it’s not going to be resolved for a while. Amid today’s excitement, we shouldn’t forget that Obama gave higher education and student loan debt a lost decade.

CBO: $1.3 Trillion in New Federal Student Loans by 2027

Each year the Congressional Budget Office (CBO) provides its baseline projections for the federal student-loan program. This year it published them early with its annual “Budget and Economic Outlook.” The projections include the total amount of new federal student loans that the office believes will be disbursed, future interest rates, and subsidy costs, i.e. whether the government will make or lose money on the loans. This year, the CBO projects that the government will lend an additional $1.3 trillion to students between FY2017 and FY2027. The figure is up slightly since the 2016-2026 period, discussed here.

Subsidy Rates

The CBO uses an accrual-accounting methodology to determine the present value of federal loans. This essentially means discounting the estimated cash flows of student loans against government securities. If student loans make more money than buying government debt would, then the loans are valuable. Accrual accounting does not include the market risk that a private lender would consider when offering a student loan, which is why many people advocate fair-value accounting. It’s a surprisingly contentious issue, which I elaborate on in the student debt data page, because under most fair-value accounting estimates the government loses money on student loans.

Under accrual accounting, the CBO projects negative subsidy rates for federal student loans; that is, it sees the government profiting from its lending. All student loans issued in FY2017 will earn an estimated 13.3 percent return, about the same as last year. Of interest to law-school watchers: Unsubsidized Stafford loans and Grad PLUS loans issued in FY2017 will make 18.6 percent and 20.8 percent returns, respectively. Oddly, Parent PLUS loans appear to be the most profitable for the government.

As with last year the CBO included fair-value estimates of federal student loans. By this measure, the government loses about 10 percent of its investment on student loans every year until FY2027. Unsubsidized Stafford loans and Grad PLUS loans lose about 4.5 percent in 2017, but the percentage increases over the decade. Parent PLUS loans remain profitable.

Note also that the CBO believes the net number of loans will rise during the decade. It’s already evident that federal student-loan borrowing is declining.

Under accrual accounting the student loans will net the government $112.6 billion; under fair-value accounting the government will lose $133.8 billion. This isn’t a lot of money for the government, actually, but it could obviously be redirected to better uses.

Interest Rates

A crucial variable affecting subsidy rates is the CBO’s projection of future interest rates. Last year, the office believed interest rates for FY2016 would be about half a percent higher than they turned out to be. This year, the CBO estimates that interest rates will plateau at 3.5 percent starting in 2022.

Last year, I argued that the interest-rate estimates were more plausible than two years earlier. That was, however, before the election, and now the rate on 10-year government bonds is much higher than before. As a result, student debtors will probably pay higher rates starting in the next academic year, and the accrual method will produce higher future profits for the government that are probably illusory.

Does Charlotte Law School Offer a Test of the Bennett Hypothesis?

The Charlotte Observer tells us that the Department of Education believes Charlotte Law School has engaged in “‘dishonest’ practices,” and as a result it is yanking CLS’s access to federal student aid by the end of the year. ED blindsided CLS—at least that’s the school’s story—but apparently its low bar-passage rates, the ABA’s probation of it, and its alleged misrepresentations to applicants and students are the culprits. Maybe CLS will successfully appeal the decision, but if it doesn’t then we’ll get the opportunity to test whether law schools absorb federal student loans and pass them back on to students, aka the Bennett hypothesis.

Okay, maybe the shock is so sudden that the school would need to scramble to balance its budget anyway (and I think the “90/10” rule applies, but I won’t go into that). However, we do know some things about how CLS’s revenue and spending.

For one, in the 2015-16 academic year a mere 31.3 percent of its full-time students paid full tuition ($41,348). Altogether, it made $8.5 million from these students. Thanks to the article and ED data, we know that last year the school was a conduit for $48.4 million: $19.1 million in direct unsubsidized Stafford loans and $29.3 million in Grad PLUS loans. Because CLS is relatively new and freestanding, it probably has no significant endowment or gift income.

Here’s how much federal loan money CLS has disbursed each year since it was founded and its revenue from full-time students paying full tuition.

Note: CLS’s numbers of full-time students paying full tuition appear erratic for unknown reasons, probably misreporting by the law school, but that’s CLS’s problem, not mine.

And here’s how much it disbursed per student (including non-recipients), along with the weighted-average full tuition between full-time and part-time students. Not everyone borrows each type of loan, but the chart gives a sense of how much students are paying for both their educations and living expenses on top of that.

CLS is an unusual case because it was founded around the time odious Grad PLUS loans came into being. Its budget is undoubtedly acclimated to them and probably can’t be balanced without them. Moreover, I think I’ve underemphasized how crucial it is that they pay for law students’ living expenses. Without that, students would not be able to go to law school. Nevertheless, the Bennett hypothesis tells us that if this school is to remain in business as an ABA-accredited school but without access to federal loans, then we should expect it to charge much, much less than it currently does. Although, it may offset costs by encouraging students to borrow from private lenders, whose loans will not be dischargeable and probably require co-signers.

I doubt CLS is as bloated as an elite law school is, but it will soon cost a lot less to attend if it wants to stay in business. Unfortunately, I suspect liberals will see CLS’s downfall as a victory over predatory for-profit colleges rather than evidence that federal loans help law schools more than students. Still, it’s a victory. Maybe Infilaw will get the message that many nonprofit law schools should’ve years ago.

Finally, in passing I notice that CLS’s enrollment is quite lopsided: 452 women to 260 men. The mainstream discussion on law school enrollment in 2016 is emphasizing how women now outnumber men. Without CLS, the margin falls to a sliver. It’s a notable finding, but I’d like it if the coverage drew more attention to the fact that men attend more prestigious law schools (some articles do). I don’t see it as a milestone for the profession because it’s pretty clear that schools like CLS enroll a larger proportion of women—and schools like CLS don’t offer much of a path to a professional career.

WSJ’s Editorial Page Blames Obama for Preventing Student Loan Defaults

I wrote that the WSJ’s reporting on student loans had improved slightly. Its editorial responding to the GAO report on the Department of Education’s cost estimate of income-driven repayment plans, on the other hand, backslides. It’s really more of a rant than an editorial, but here’s a digest of what I think it was arguing:

• Cutting out banks as middle-men for federal student loans costs taxpayers money, even though it didn’t, and that change had nothing to do with IDR plans.
• Democrats knew that student loans would never be repaid when it federalized student lending. Again, even if true, this claim has nothing to do with IDR plans, which were authorized by prior administrations.
• IDR plans keep default rates “artificially low,” which while technically accurate doesn’t explain how debtors are supposed to pay loans they can’t repay. What would the WSJ propose if all these people default instead?
• The Obama administration allowed borrowers to retroactively sign on to IDR plans, which is true but doesn’t explain how debtors would repay the loans otherwise since they probably would not be able to discharge them in bankruptcy.
• IDR is an “entitlement” that can be “exploited,” even though there’s no evidence student debtors could repay their loans without it. Assuming the GAO’s report is correct, IDR plans are doing exactly what they are supposed to do. The problem is that too many people have too much debt.
• The Obama administration is responsible for the shoddy accounting of student loans’ ultimate costs—which I’ll accept—but it doesn’t blame lending programs passed by the Bush II administration that created these unpayable debts to begin with. Seriously, the WSJ threw the 2000s down the memory hole.
• The Obama administration used costly IDR plans to buy votes. No evidence is given, and didn’t younger voters bail on the Democrats in this election? Nice bribe, Obama.
• Implicitly, the Republican-controlled Congress bears no responsibility for failing to create more jobs or raise incomes, even though it was more concerned with slashing the budget, shutting down the government, and threatening to default on the national debt despite trifling interest rates.

I feel bad for the reporter who carefully tried to explain the GAO’s report and was just upstaged by an incompetent, partisan editorial. (I hope it’s not the same author.)

There’s much blame to place at Obama’s feet regarding the value of college education and student loans. One of these days I’d like to summarize my coverage of him to gauge my fairness towards the outgoing administration. Hopefully, I’ve been consistently non-partisan in my analysis, but perhaps not. However, if the best the WSJ can do is blame Obama for preventing defaults on loans that could not be repaid given the Congresses he had to work with, I’m confident my final assessment will smell like roses by comparison.

WSJ’s Student Loan Coverage Improves: More Facts, Fewer ‘Deadbeats’

And not just facts, neutral facts, which is how reporting is supposed to be. I’ve criticized The Wall Street Journal‘s student loan coverage, but its most recent article on the topic, “U.S. to Forgive at Least $108 Billion in Student Debt in Coming Years,” is a start in the right direction.

Okay, the title could use some work. More accurately, it should be something like: “GAO Projects U.S. Will Forgive $108 Billion in Student Loans in Coming Years.” It’s 76 characters, which is too long for most SEO-obsessed editors, but it doesn’t characterize a possibility as a certainty.

Conversely, the WSJ neglects to cite another GAO study on the subject of student debtors’ earnings. Its data are nearly two years old, but they show that 72 percent of people on income-sensitive repayment plans were earning $20,000 annually or less. Not even 10 percent of IBR and PAYE participants (157,000) made more than $40,000 per year.

Thus, the WSJ’s reasoning still follows a shaky line of reasoning:

(1) IBR participants’ debts are high,

(2) High debts are only feasible for grad students taking out Grad PLUS loans,

(3) Graduates tend to find jobs with high incomes and have low unemployment rates,

(4) So the benefits of IBR go to high-income people.

The prior GAO study pokes holes in (3) and (4). Income is the independent variable, not debt, and incomes are low. Still, the WSJ’s reporting this time inserts enough adverbs to qualify these claims that I’m going to give this an earned “C.” There is no grade inflation on this blog.

Oddly, in its haste to cover the GAO’s attacks on the government’s accounting for student loans, the WSJ neglects to include immanent compensating factors that will raise student debtors’ incomes: tax cuts, stimulus, job growth, a harried Fed, and 3-4 percent growth in the near future. Things will rapidly get better for America’s student debtors.

WSJ Has No Idea Who Benefits From IBR/PAYE/REPAYE/ETC

A hypothetical: Jill and Jack live in the same town. Jill has many healthy habits but is a nurse who spends time around infected people, Jack less so. The town is hit with a case of spectrox toxaemia, a dangerous disease. The government offers to immunize people. Jill decides to be immunized; Jack does not. Jill does not get sick; Jack does. So, epidemiologists, did Jill not contract spectrox toxaemia because she was immunized or because of her healthy habits (or luck)?

If you’re The Wall Street Journal, the answer is her habits. Most of us would believe otherwise, given how dangerous spectrox toxaemia is and Jill’s contact with its victims.

Likewise, this line of reasoning animates the WSJ’s opinion of the government’s income-sensitive repayment programs for student debtors, which it claims benefit higher-debt people with better credit scores than lower-debt people who don’t. It’s unintuitive, if you’re the WSJ apparently, but it makes more sense to those of us familiar with the student debt system.

Here’s how it works: People who take out lots of debt might not in fact have the incomes to repay them, so they choose an income-sensitive repayment because the alternative is … Default! Thus, looking at how much they borrow is less important than looking at how much they’re paid.

Last year, in fact, the Government Accountability Office explored this topic and found that most people in income-sensitive repayment programs were earning less than $20,000 annually. So the Jills aren’t so different from the Jacks after all.

Sure, if there were no IBRs/PAYEs/REPAYEs/ETCs, then these Jills with good borrowing habits would be more likely to take deferments and forbearances, but their debts would still not be repaid. That’s because debts that can’t be repaid will not be repaid, no matter what someone’s credit score or how much they borrowed. What matters is what they earn, and college graduates don’t earn much these days.

And if you think the Jills have too much debt, then the problem isn’t IBR/ICR/REPAYE/ETC, it’s that the government lends too much money to people for degrees they don’t need.

High School Grads Get a Big Raise, College Grads? Not So Much

Last week, the Census Bureau published the 2015 edition of its Income, Poverty, and Health Insurance tables. This information is my favorite source for understanding the value of higher education: More young people are getting college credentials, but their aggregate income isn’t rising much, which means they’re not much better off.

Indeed, in the mean-average year since 1991, people who didn’t start high school have received bigger raises than any other category. College graduates barely do better than high school grads. Meanwhile, many more people have gone to college and fewer just stop at high school.

As for 2015, the high-schoolers got a much bigger raise than the college grads.

(The data are highly erratic, but it’s still fun to do the horse-racing.)

That’s all, folks.

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Past coverage:

• “Everything I Needed to Know: The Middle School Premium” (October 10, 2015)
• “More Education ≠ More (National) Income” (October 9, 2014)