As president, Bernie Sanders intends to eliminate every penny of the student loan debt held by tens of millions of Americans. Sanders’s debt cancelation plan and his intention to finance it with taxes on certain financial transactions is even more indiscriminate than the plan introduced by Elizabeth Warren in April, which directs most of its assistance to households making less than $100,000.

The numbers Sanders uses to justify so radical a move are familiar: “45 million people hold some $1.6 trillion in student debt” and the “average college student in the U.S. graduates with close to $30,000 in student loans. But these numbers are misleading.

First, it’s not true that the average college student graduates with nearly $30,000 in debt. The average borrower owes $28,650 upon graduation from a public or private nonprofit college. But over one-third don’t borrow at all.

Second, average loan debt disguises profound differences among debtors. As New York Federal Reserve Bank researchers said in 2015, “the heterogeneity of borrower indebtedness is very pronounced.” Nearly “39 percent of borrowers owe less than $10,000, and the median balance is about $14,000.”

Recall from your old statistics class that the median borrower is the one in the middle. If you’ve got five borrowers, four of whom have borrowed $1,000, and one of whom has borrowed $100,000, the median–what the third borrower owes–is $1,000. The mean—what we call the average—is over $20,800. Student loan debt shows a similar pattern, in which a relatively small number of high dollar debtors increase the average. In a 2016 review of all student debt, not just recent undergraduate loans, the Federal Reserve found a mean of $32,731 and a more manageable-sounding median of $17,000.

The amount you owe is not a useful guide to how much trouble you’re going to have when you try to pay it off—the student who takes out $100,000 to attend a good law school may be in better shape than the student who borrowed $5,000 to go to a lousy college. But on average, to draw on the New York Federal Reserve again, college is an excellent investment.

Even with opportunity costs factored in, the New York Fed calculates the return on investment in college at “nearly 14 percent,” which “easily exceeds various investment benchmarks, such as the long-term return on stocks (7 percent) or bonds (3 percent).” It’s not a great investment for everyone, particularly those who don’t finish. But a plan to forgive everyone’s loans, or even Elizabeth Warren’s plan to forgive nearly everyone’s loans, is a massive investment in a population that, by and large, are reaping, and will in the long term continue to reap, the rewards of a smart investment.

I guess that’s socialism for people who are doing all right.

The Loan Ranger via @commentarymagazine
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