Three Reasons You Shouldn't Worry About The Student Loan Bubble

Kyle Stokes / StateImpact Indiana

Students walk between classes on the campus of Indiana University-Purdue University Indianapolis.

Yes, writes Andrew Rotherham in TIME, “we are most likely in the middle of a higher education bubble.”

No, he adds, you shouldn’t be worried about it — at least not enough to skip college altogether.

We broached this subject earlier this week, after a recent New York Times piece highlighted “troubling trends” in the student lending market even if the theories about a higher education bubble are bunk. (And they might be.)

But Rotherham tries to counterbalance what he describes as an “hysteria” about college debt in his TIME column, arguing the NYT may have overstated the problem.

Here are three of Rotherham’s key points:

• Credit card debt is falling. Much was made of news in 2010 that — at more than $1 trillion — the nation’s student loan debt burden had surpassed its outstanding VISA bill. But that’s only true because we missed the other half of the trend: credit card debt fell 11 percent in 2011 and 7 percent in 2010, as CNN Money reports. At minimum, Rotherham seems to suggest, that should reframe our concerns about student debt levels spiraling out of control.
• Worry more about the degree’s quality, not the debt’s quantity. As Rotherham writes:

What should worry us more than the national student debt load — which is still not well understood because the data are so murky — is the likelihood that particular categories of students are getting a bad deal. Students at for-profit schools, for instance, are incurring more debt and in many cases getting little or no value for their money. These students tend to come from low-income families and returning military veterans and are the most likely of all college students — public, private, four-year, two-year — to default on their loans and torpedo their credit scores in the process. As a country, we need to do a better job of informing prospective students before they take on large debt loads at a certain school that other good — not to mention less costly — options are available.

• By and large, college is still worth the debt. “Higher education still makes sense for many Americans,” Rotherham says, “especially for low-income students who the data show clearly have the most to gain by attending college.” (see: this, this, this, and this.)

As for the bubble itself, Rotherham says he’s confident it will correct as the job market gets better and as students gravitate towards programs that offer the most meaningful degrees.

What do you make of Rotherham’s take on student loans? Is he understating the problem? Or has he hit on something here?