We estimate that the resumption of student loan payments will result in only a 0.3 percentage point drag on GDP.
Student debt is not going to bankrupt the nationStudent debt sponsored by the government can be thought of either as a burden on taxpayers or as an investment in the future of the economy. Beginning in 2010, the federal government became the overwhelming source for funding and the administrator of student loans, replacing its traditional role as guarantor of loans that originated in the private sector. The government takeover of student lending was thought to be a more efficient and equitable system of loan origination and repayment, cutting out the middleman function of private banks. There is the debate over the cost to the taxpayer, and on a philosophical level, the nationalization of a profit-making (though government-guaranteed) enterprise. Detractors of the government takeover point to the relentless increase in student debt over the past 15 years and point to government involvement as facilitating its growth. We question that logic. As we’ll discuss, the amount of student debt amounts to a fraction of gross domestic product. The cost of college appears to have plateaued after large increases in the 1990s and 2000s before the government takeover. But most important, nearly half of student debt is owed by 10% of borrowers for their graduate work. These are the professionals who will be in position to repay the loans, either through their potential income or through public service.
Don’t blame the freshmen!Digging down into individual loans suggests misguided concerns over who is taking out the loans and what they are financing.
Default rates are highest among borrowers with low balances.