Assets and Debts

The big headline this week is that aggregate student debt in the U.S. surpassed a trillion dollars and to no surprise, it's hitting grads hard. It's now greater than credit card and auto debt. It's also something that, as a researcher of urban issues, I wish we had a better handle on.

(from HeatherMG on Flickr)

People say that student debt is "good debt", because you used it to buy something of value. People with college degrees make more money than people without them - that's not really up for debate here. Mortgage debt could also be considered "good debt" in this regard. Every month you're paying a chunk of money to eventually own a really big asset - a house.

There's one huge difference between owning a house and having a college degree though. A house is an "asset" from an accountant's perspective. It's a physical thing that sits on top of a piece of land. Both the sticks and bricks and the land are worth something (except in the worst case scenarios). If you buy a house and then 10 years down the road decide that you don't want it anymore, you sell it. As long as it hasn't depreciated, you wipe out your debt and probably have some money in the bank too.

A student loan is an asset in another perspective, because holding one opens certain doors that otherwise you wouldn't be able to open. But you can't ever sell your degree to somebody else if you don't want it anymore, and that's a problem for college grads working at Starbucks who might actually prefer a debt free life if they feel discouraged and stuck in low wage work. Unfortunately for them, you can't sell your degree, and the debt you used to buy it is nearly impossible to expunge.

The Occupy people have opened a dialogue about wealth in America, but I feel like the discussed is heavily tilted toward  the question of income. Income is the money that comes in the door. Wealth is that money minus the money that goes out the door. Who's in better financial shape? A recent grad working at a job with a $40,000 salary and no student debt? Or a recent grad working the same job for the same income but whose paying $6,000 a year in loan payments? There's a pretty big difference between $34,000 and $40,000, especially in a high-cost city.

I can really easily look up data about income. The U.S. Census Bureau collects it as part of their American Community Survey. I could tell you which cities, and which neighborhoods in cities, have people that earn a lot and which have people who don't. What I can't tell you is how much student debt people in those places have - Census simply doesn't collect it.

That's really unfortunate, because without knowing how much student debt college grads have, it's nearly impossible to know whether the income numbers are truly accurate when assessing how wealthy a city or a neighborhood is. I have some ideas how how this could possibly be modeled, but it would be an estimate at best. In the meantime, I'll keep thinking.