Over the last ten years, as outstanding student loan debt has mounted and been assumed by a more diverse, less affluent group of students and their families than was the case for prior cohorts, a common policy response has been to wave away its impact on wealth, both individually and in aggregate, by saying that the debt finances its own repayment. First of all, so the claim goes, student debt finances college degrees that in turn pay off in the form of higher earnings, enabling debtors to repay. Second, expanded allowance for income-driven repayment (IDR), by capping debt service as a share of disposable income, eliminates the worst forms of delinquency and default. The first claim says that repayment is inevitable, the second that it need not take place. Both claims together, however, serve to rationalize higher debt, higher tuition, higher attainment, and the forces driving all three.
View the full post, by JFI senior fellow Marshall Steinbaum, on the Phenomenal World here.
View the press release here.
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