The Tyranny of Misleading Facts: or why I don’t care that college debt exceeds credit card debt

One factoid making the rounds of the punditry is the discovery that the total amount of college debt now exceeds the total amount of credit card debt. This is somehow supposed to demonstrate the dysfunction of higher education while showing us the next financial bubble that will burst in the US.

This little fact is an example of how irrelevant information can be used to reinforce a preconceived set of (and often highly politically charged) ideas about the condition of American higher education.

Let’s begin with this question. Would the US be better off if more people paid their college tuition by credit card? Sounds absurd, doesn’t it. Yet that would surely make the ratio of college debt to credit card debt go down. This points out why that ratio is an irrelevant measure. In general credit card debt is used for one purpose, and higher education loans for quite another. They rise and fall for quite different reasons. Credit card debt has been falling since the great de-leveraging of the US economy began, following the financial crisis of 2008. This reduction in credit card debt is arguably a good thing, since consumer debt is short term, carries very high interest rates, and generally is not used to buy long run productive assets of great private and social value (like an education). But as credit card debt falls, somehow this makes the world look deeply problematic because higher education debt is now higher than credit card debt. Come again?

Student loan debt has been rising over time, but much of this increase is because we have 40% more students trying to earn a degree than we did a decade ago. And many of the new entrants into higher education come precisely from families that are least able to afford the sticker price out of their current income. These are the families who must use credit to buy this lifetime asset. This is not a problem, unless the payoff to that asset does not justify the borrowing.

The asset, however, amply justifies the borrowing. Good evidence of this is here in a recent article in the Journal of Economic Perspectives, written by Sarah Turner and Christopher Avery, titled Do College Students Borrow Too Much — or Not Enough?

Anyone who wants to go beyond silly sound bites about credit card debt should read this article.

There is no evidence that the vast majority of student borrowers are getting into unreasonable and uneconomic debt. Instead, the expected lifetime earnings profile of someone with a degree has improved substantially over time. And there is little evidence that the burden of repayment relative to income has increased over time.

Unfortunately, facts like these get in the way of a good story of bubble and financial collapse.


  1. As someone that has worked with people in credit card debt for many years the new statistics are intriguing. Arguably, student loan debt is far superior to credit card debt although I think the trend is concerning for those who will be looking for student loans in the next ten years. Considering I have two children that meet that criteria I’m watching all of this closely.

    Hopefully when the time comes we won’t need student loans, but they sure were a lifesaver for me. The concerning thing to me is that I have so many acquaintances and friends that NEVER ENDED UP USING THEIR DEGREE!! I watched my brother struggle to send his two girls to college, they also homeschooled them prior to college so a huge investment in their future and education was made. Both married before the age of 24, one works at Starbucks and the other is a stay-at-home Mom. That has to burn a little although my brother will never admit it!