Tag Archives: interpreting statistics

Rising debt for college loans better than debt for a McMansion

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The college Class of 2011 might expect more in life than simply to be known as “the most indebted ever“:

22,900: Average student debt of newly minted college graduates

The Class of 2011 will graduate this spring from America’s colleges and universities with a dubious distinction: the most indebted ever.

Even as the average U.S. household pares down its debts, the new degree-holders who represent the country’s best hope for future prosperity are headed in the opposite direction. With tuition rising at an annual rate of about 5% and cash-strapped parents less able to help, the mean student-debt burden at graduation will reach nearly $18,000 this year, estimates Mark Kantrowitz, publisher of student-aid websites Fastweb.com and FinAid.org. Together with loans parents take on to finance their children’s college educations — loans that the students often pay themselves – the estimate comes to about $22,900. That’s 8% more than last year and, in inflation-adjusted terms, 47% more than a decade ago.

In the long run, the investment is probably worth it. Education is a much better reason to borrow money than buying cars or McMansions, and it endows people with economic advantages that the recession and slow recovery have only accentuated. As of 2009, the annual pre-tax income of households headed by people with at least a college degree exceeded that of less-educated households by 101%, up from 91% in 2006. As of April, the unemployment rate among college graduates stood at 4.5%, compared to 9.7% for those with only a high-school diploma and 14.6% for those who never finished high school.

I am intrigued by the McMansion comparison here as it is used to illustrate the foolishness of overspending on a big or expensive house versus the possible “good debt” of college loans. Of course, this is all in economic terms as the education is expected to pay off down the road while McMansion purchases of the last 15 years are not expected to yield such great values in this poor housing market. (And using a car as a debt comparison seems a bit strange: a car is rarely an investment but rather a black hole for money.) But this view of a house, as an investment opportunity, is a relatively recent development.

There is something about this data that could warrant a closer look: while it appears that the average college student debt has increased, is the average really the best measure here? I would much rather see a distribution of college debt in order to better know whether this mean is heavily influenced by people with massive amounts of college debt. Here is a paragraph from a recent New York Times article regarding college loans:

Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.

And here is some additional data from recent years that sheds more light on the distribution of college debt:

These figures were calculated using the data analysis system for the 2007-2008 National Postsecondary Student Aid Study (NPSAS) conducted by the National Center for Education Statistics at the US Department of Education. (For comparison, cumulative education debt statistics from the 2003-2004 NPSAS are also available.) The 2007-2008 NPSAS surveyed 114,000 undergraduate students and 14,000 graduate and professional students. These statistics are not necessarily available from published NPSAS reports.The median cumulative debt among graduating Bachelor’s degree recipients at 4-year undergraduate schools was $19,999 in 2007-08. One quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more. 9.5% of undergraduate students and 14.6% of undergraduate student borrowers graduating with a Bachelor’s degree graduated with $40,000 or more in cumulative debt in 2007-08. This compares with 6.4% and 10.0%, respectively, for Bachelor’s degree recipients graduating with $40,000 or more (2008 dollars) in cumulative debt in 2003-04.

This data provides a median that is somewhat similar to the two figures cited above. Based on these three figures and interpretations, it sounds like more college students are taking on debt rather than some students are taking on a lot more debt.

More appealing measurements of the American economy

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The Economist looks at several ways in which the US federal government calculates certain economic statistics that might make our economic situation look most appealing. Here is their conclusion:

Conspiracy theorists might conclude that the American government is trying to nip and tuck its way to attractiveness. The persistent downward revisions to GDP growth do look suspicious. But in other areas American number-crunchers seem to believe that their measures are better; indeed, history shows that European statistical agencies have often later adopted their methods. The world’s biggest economy is also much less bothered about the international comparability of its numbers than smaller European countries. True, when the statisticians at the IMF or the OECD produce comparative data, they do so on the basis of standardised definitions. The snag comes if investors fail to grasp that official national figures can show the American economy in an overly flattering light.

Complex numbers, such as these, can be difficult to operationalize or calculate but they also need to be interpreted. Economic experts may know about these methodological differences and can account for these but I’m guessing that the average citizen of the US or European countries has less of an idea about what is going on.

Another US figure that has recently attracted methodological attention is unemployment. While the US unemployment rate has undoubtedly risen in the economic crisis of recent years, it has its own quirks. One part that has been discussed in that people have to be actively looking for work in the last 4 weeks and once people move beyond that cut-off point, they are no longer counted as being unemployed. Another area involves those who work less than full-time but want full-time work and could be classified as “underemployed.” (You can see how the Bureau of Labor Statistics calculates unemployment here.)

(It is also interesting in this story that they compare the calculation of these statistics to cosmetic surgery, apparently an important marker of American culture.)

Debating the decline of religion in America

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For several decades now, sociologists have upheld the idea that when compared to other industrialized nations, the United States is uniquely religious. An argument for secularization which gained prominence in the 1960s was eventually refuted as Americans showed a remarkable religious vitality.

But some argue that new data about religion in America suggests that religion may indeed may on the decline. In a new book titled The Decline of American Religion, sociologist Mark Chaves looks at some of the evidence:

His conclusion: “The burden of proof has shifted to those who want to claim that American religiosity is not declining.”…

“…[E]very indicator of traditional religiosity is either stable or declining. This is why I think it is reasonable to conclude that American religion has in fact declined in recent decades — slowly, but unmistakably,” Chaves said.

Those indicators of decline, taken from General Social Survey data, include:

  • From 1990 to 2008, the percent of people who never attend religious services rose from 13 percent to 22 percent.
  • Just 45 percent of adult respondents born after 1970 reported growing up with religiously active fathers.
  • In the 1960s, about 1 percent of college freshmen expected to become clergy. Now, about three-tenths of a percent have the same expectation.
  • The percentage of people saying they have a great deal of confidence in leaders of religious institutions has declined from about 35 percent in the 1970s to about 25 percent today.

This particular data would seem to suggest a very slow decline – though Chaves himself seems careful to say that the data could also be interpreted to say that there is stability.

Sociologist Bradley Wright looks at some similar data in his book Christians Are Hate-Filled Hypocrites (read a description of the argument here) and comes to a slightly different conclusion. Wright suggests some of the people who now identify as non-religious simply don’t like to identify with organized religion and that many of them still say they have religious beliefs and practices. Wright also briefly argues that the number of committed religious people may not have changed; rather, “cultural” Christians may be those who are now identifying as non-religious.

Time will help settle this debate: in the United States, will religion continue to decline in future years and exactly what shape will this decline take? In the meantime, we will have to see how Chaves’ claim that the burden of proof is now on those who show there is not a decline plays out.

Exactly how many American homes are vacant?

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Two bloggers have a disagreement about how many vacant homes there are in the United States. Check out the debate and the comments below.

The moral of the story: one still needs to interpret statistics and what exactly they are measuring. The different between 11% and 2% is quite a lot: the first figure suggests 1 out of 10 housing units are vacant while the second figure suggests it is 1 out of 50. If you look at Table 1 of this Census Bureau release regarding housing figures from Quarter 4, it looks like the vacancy rate is 2.7%. But there may be confusion based on Table 3 which suggests the vacancy for all housing units is roughly 11% for year-round units. And later in the release, page 11 of the document, gives the formula for the vacancy calculation and an explanation: “The homeowner vacancy rate is the proportion of the homeowner inventory that is vacant for sale.”

There are some other figures of note in this document. Table 4 shows that the homeownership rate is at 66.5%, down from a peak of 69.2% in the fourth quarter of 2004. (It is interesting to note that this rate peaked a couple of years before the housing market is popularly thought to have gone downhill. What happened between Q4 2004 and the start of the larger economic crisis? Table 7 has homeownership rates by race: the white rate has dropped 1.1% since 1Q 2007 while Blacks and Latinos have seen bigger drops (3.2% and 3.3%).