Is cancelling some or all student-loan debt fair?

The answer to that question depends on a lot of things, including your philosophical and political point of view. It also depends on your understanding of who will benefit from wiping out the $1.5 trillion in outstanding student loans.

A new analysis suggests we may have a skewed view of who that might be.

The Survey of Consumer Finances — a data set that’s used widely by think tanks and journalists to illustrate the income breakdown of student-loan borrowers is glossing over a key borrower demographic: Those who move back in with their parents.

And that makes the student-loan borrower population look richer than it actually is, Matt Bruenig, the founder of the People Policy Project, a progressive think tank, wrote in a blog post Thursday.

That’s a problem, Bruenig said in an interview, because it means that the debate raging over whether recent proposals from Senators and Democratic presidential candidates Bernie Sanders and Elizabeth Warren unfairly benefit the well-off are on shaky ground.

“If we’re going to basically talk about how fair the student-debt forgiveness plans are and your notion of fairness has to do with whether it is distributively equal,” Bruenig said. “You have know what the distribution is and this data source does not allow you to know this distribution very well.”

Indeed, one of the major criticisms surrounding student-debt cancellation plans is that they would be a giveaway to wealthier borrowers.

White households with a bachelor’s degree have about $400,000 in net worth, compared to $68,000 for black households with a college degree, according to recent research by Demos, a left-leaning think tank.

Higher student-loan balances tend to be concentrated among borrowers with higher incomes because they typically hold advanced degrees. Attending graduate school is associated with both higher debt loads and higher earnings, and because of that these borrowers hold a large share of outstanding student debt.

That means they would theoretically benefit the most — at least measured in the amount of dollars forgiven — from the type of debt cancellation plans proposed by Warren and Sanders.

Bruenig’s post raises questions about how well-off the student-loan borrower population actually skews. The Survey of Consumer Finances assesses a household’s balance sheet by zeroing in on the breadwinner or bread-winning couple and asking them about the household’s finances, including their debt load. That method could easily miss a 25-year-old struggling with their debt who moves back in with their parents to help mitigate that burden, Bruenig said.

Even if the parents in the household choose to report their boomerang child’s debt, it would be reported as part of the household’s. That means the debt would be correlated with the parents’ income, which is likely higher than the child’s.

As a result, the income and age of student-loan borrowers reported by this widely-cited survey, likely skew higher than the reality, Bruenig said.

Bruenig isn’t the first to make this observation. Matthew Chingos, the vice president, education data and policy at the Urban Institute, a think tank, said he heard similar pushback in 2014 to his own research based on data from the Survey of Consumer Finances.

Chingos said his response at the time went along the lines of “well that’s all fine and good, but there’s no better data, that’s what we have,” he said.

In the years since, other data has backed up, more or less, the data picture painted by the Survey of Consumer Finances, Chingos said.

Research by Adam Looney, a former deputy assistant secretary for tax analysis at the Treasury Department, and Constantine Yannelis, a finance professor at the University of Chicago’s Booth School of Business, found that borrowers in the highest-income quintile hold a larger share of student debt than those in the bottom-income quintile.

That analysis was based on a match of tax and student-loan data and so it doesn’t have the same challenges as the Survey of Consumer Finances, Chingos noted.

Still, 12 years after entering college, white men have paid off 44% of their student-loan balance on average, according to Demos. For white women, that share drops to 28%. Black women actually see their loan balances actually grow 13% on average, 12 years after leaving school, while black men see their balances grow 11%.

So how poor are those saddled with student debt? “We need better data, for sure,” Chingos added.

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