Thursday, June 26, 2014

Maybe fears about student loan debt are overblown

Tuesday's NYT ran a story summarizing some recent research by two Brookings Institution economists regarding student loan debt.  The punchline -- maybe this is not such a big deal after all.  (For amusement be sure to see this Bloomberg Businessweek piece that links to a "sky is falling" NYT story on student debt that ran just two days earlier!)

The Brookings research makes two main points: (1) even though the debt numbers are up, so are incomes streams; the ratio of monthly student loan payments to income has not changed much over the last 20 years and (2) roughly 75% of those with debt owe no more than $20k; only 7% have more than $50k.

Of course there are still some serious issues, especially among those who borrow but do not complete degrees and those who complete degrees in fields with limited labor market opportunities.  But maybe students have a much better idea of what they are getting into than we think!

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