Abstract
The general perception of a student debt “crisis” misses the reality that most education borrowing improves people’s lives by increasing educational opportunities. Higher income people carry more student debt than lower income people. However, specific groups of people and specific types of debt cause serious difficulties. Default rates are disturbingly high, but the biggest problems are among students who do not complete their programs and among those who attended for-profit institutions. Finding solutions to the very real problems requires pinpointing the problems, targeting the solutions, and recognizing the responsibilities of both borrowers and taxpayers. The most important strategy for ameliorating student debt problems is preventing people from borrowing for programs they are unlikely to complete and institutions that won’t serve them well. Major steps for dealing with existing debt include an improved income-driven payment system that appropriately supports borrowers while expecting most to repay their debts in full and improving the structures surrounding the repayment and collection processes. Other potential policy modifications could ameliorate the difficulties facing borrowers even without total overhaul of the system.
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