A chart and story from Sober Look called Gap between college tuition and consumer income is at record levels has been making the rounds in the last 24 hours.
Analysts point out that higher education costs in the US have significantly outpaced inflation. Another way to look at the issue however is to compare college costs with disposable income. The gap between the two has widened to historical highs.
The data has been normalized to 100, so pay no attention to the labels on the Y-axis.
This is another market distortion created by the US government (similar to the housing market) by providing an almost unlimited amount of credit and pricing it below market. It allowed schools to raise tuition without the demand constraint that would normally exist in a market. As a result the US consumer student loan burden is now higher than either auto or credit card debt (see discussion). And now we are also seeing a rise in delinquencies (see post)...
There follows another chart showing student, auto and credit card debt. Visit the Sober Look story to see it.
And now, here's the quiz: What is the flaw in the graph above? The graph is not wrong per se, but it is misleading. Why is it misleading? How does it manage to leave out so much of the rising tuition/student debt story?
These are not trick questions. I have discussed the flaw in such graphs several times on DOTE.
Post your answers in the comments. Even if somebody posts an answer you agree with, say that's your answer too, along with your own commentary.
I will post my answer at about 2:00 pm today.
Bonus Video — An NBC report on student debt slavery (broadcast in late 2011)
"Disposable income" rising = consumer debt product, not actual earnings rise?
Posted by: bill | 10/03/2012 at 08:34 AM