Is There A Good Side To Student Debt?

by Mikaela Gilbert-Lurie

Somewhere out in the world, there is a list of things that are considered universally and objectively terrible. Food poisoning, Von Dutch, torn cuticles, chemical warfare, and the entire Real Housewives franchise are on that list. Many people would put graduating from college with student debt on that list too, but apparently, those people would be wrong. It turns out that there's actually a sweet spot where student debt correlates with a higher graduation rate, according to a study published by Rachel Dwyer of Ohio State University. So, maybe student debt isn't actually all that bad after all. Or... something.

The study found that students with $10,000 of debt had a graduation rate of about 67 percent, which was higher than the graduation rate of people who had either more or less debt. The theory goes that students with this much debt have invested a lot into their educations, although not an overwhelming amount; thus, they work hard enough while they're in school to ensure that their investment pays off.

A more recent study by Jonathan Cowan and Elaine Kamarck at Third Way Think Tank confirmed these results, explaining, "Student loans, then, represent both an opportunity and a risk, just as do other forms of credit." The continued, "Loans have allowed many students — thousands of students in several generations — to attend and complete college when they would not otherwise have been able to do so. For these students, loans are an investment, in human capital and a middle class life." Third Way, like Dwyer, also set the sweet spot for return on that investment to be at $10,000.

I think that the results of this study can be most aptly compared to a phenomenon that college students everywhere are familiar with: Ballmer Peak. Ballmer Peak, named for Steve Ballmer of Microsoft, is known as a stage in engineering in which consuming alcohol correlates with higher programming ability than one would necessarily experience sober. The takeaway is this: There's one specific point at which drinking makes programmers exceptional at there jobs, but more or less alcohol will just make you clumsy and tipsy.

Thats sort of like the debt thing. Take something bad for you in exactly the right dose and you'll actually excel, but overshoot it or undershoot it and you're worse off than if you hadn't done it in the first place. Of course, we still have that problem where the Class of 2015 is the most in-debted graduating class in history, but, well... one thing at a time.

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