3 stacks of bills
Michael Q. McShane

A couple of weeks ago, my colleague Brittany Wagner had some fun with a spokeswoman for the Million Student March and her call for the abolition of all student debt in America.  Apparently not chastened by that embarrassing episode, folks continue to push to either erase current student debt, or make college free in the first place. To buttress their arguments, proponents of such measures often cite the “crushing,” sometimes six-figure debt levels that some students have incurred. 

The important point that these discussions often miss is that it isn’t the folks with six-figure loan debt who are defaulting. By and large, it is low-amount borrowers.  In fact, the average amount of debt from federal loans in default is only $14,014.

How can that be?

Well, think about who takes out large loans to pay for college. We’re talking lawyers, doctors, and folks getting MBAs.  Sure, they rack up a lot of debt, but they also make a lot of money, so they’re able to pay it off.  The people who can’t pay off their debts are the usually the ones who took out loans to pay for a year or two of college but then didn’t complete it.  They incurred the debt and years of lost wages, but will not see the wage premium from that college degree.

The Washington Center for Equitable Growth just released a helpful interactive map that illustrates this phenomenon perfectly. It allows you to search, by zip code, the average loan balance and the delinquency rate of student borrowers anywhere in the country.  As a reference, it gives the median household income of the zip code as well.

Look, for example, at Kansas City’s 64113 zip code. Median income? $113,536. Average loan balance? Extremely high. Delinquency rate? Extremely Low.  St. Louis’s 63105 is the same story, with a median income of $86,031 and extremely high levels of student debt but extremely low rates of delinquency.

At the other end of the spectrum is St. Louis County’s 63140.  There we see a median income of only $21,750 and a low average loan balance, but a high rate of delinquency. The same is true in Kansas City’s 64126, which has a median income of $25,009, extremely high delinquency rate, but moderately low levels of student debt.

When we realize that it is low-amount borrowers who are struggling, our focus should shift from trying to make college free to trying to make college better. Those policy prescriptions don’t fit easily on a bumper sticker, but they’d do a lot more good than the slogans that do.

About the Author

Michael McShane
Senior Fellow of Education Policy

Mike McShane is Senior Fellow of Education Policy for the Show-Me Institute. He is a former high school teacher and earned his PhD in Education Policy at the University of Arkansas. Before coming to the Show-Me Institute, Mike worked at the American Enterprise Institute as a research fellow.