EDITORIAL: The college debt problem isn’t as bad as advertised

Contrary to the popular narrative, most millennials aren’t drowning in student loans. That’s because most millennials don’t even have college debt.

When pushing their loan forgiveness programs, politicians such as Bernie Sanders and Elizabeth Warren favor dramatic language. Mr. Sanders says he wants to end “the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education.”

While the amount of student loan debt is indeed a major issue that threatens to become an albatross for taxpayers, some perspective is in order. Two-thirds of millennials don’t have any college debt. That’s according to Manhattan Institute senior fellow Beth Akers, who last month published a report diving into the details of the student loan mess. She found that the average bachelor’s degree graduate who takes out loans has $28,500 in debt. To pay off that debt requires payments of $181 a month for 20 years. That should be manageable because this group has an average monthly income of $4,700.

Just 6 percent of borrowers owe more than $100,000 in student loans. These borrowers are more likely to have advanced degrees. Think of a future doctor or lawyer. The average millennial with a graduate degree earns $74,000 a year. For those with a professional degree, the number is $89,000 annually. Earlier this year, an Urban Institute study found that, among households age 25 or older, those earning more than $97,000 a year hold 34 percent of the student loan debt. Those in the bottom quartile, who earn less than $27,000 a year, hold just 12 percent of education debt.

Students from wealthier families also tend to have higher levels of debt. They are more likely to go to schools that are more expensive and remain there longer.

Large student loans aren’t pleasant, but for most high-income earnings, they’re manageable. Counterintuitively, the less someone owes, the more likely they are to default.

“Borrowers who owe less than $5,000 were more likely than those with higher amounts of debt to default within four years,” Kristin Blagg, a research associate with the Urban Institute, wrote last year. “Higher student loan balances were associated with a decreased likelihood of default, even when controlling for the borrower’s location and pre-repayment credit profile.”

The bigger problem exists when students who aren’t prepared for college take out loans and then drop out. They then have financial obligations, but they lack the skills or degree that would boost their earning power.

These numbers reveal that, when Sens. Warren and Sanders propose wiping out all student debt, they are actually proposing a massive handout for the well-off. But that doesn’t sound very catchy at a campaign rally.