U.S. college graduates and their families now owe some $1.2 trillion on their student loans, and by all accounts, Democrats are seeking to force the issue of student debt in the midterm elections. President Obama issued an executive order on Monday to make it easier for graduates to pay off their debts. The Senate is expected to vote later this week on a student-debt bill sponsored by Sen. Elizabeth Warren (D-Mass.).
This post is part of an experimental and possibly recurring feature in which Wonkblog assembles links to useful background on a policy problem in the news. Here's what you should read to understand student loans.
How messed up is the student-loan system?
- Stephen Burd's stories about bureaucratic incompetence and abuse in the federal student-loan system would be comical if they weren't so deeply saddening. His detailed review in the Washington Monthly of the history of student loans explains that they've become very difficult to shake, even if you're bankrupt.
- Federal prosecutors found that Sallie Mae overcharged active-duty troops for their student loans, and the company has been ordered to pay $97 million in fines, as Danielle Douglas reported in The Washington Post.
- Student debt stands in the way of true love, observes Cardiff Garcia in the Financial Times. He cites some fascinating statistics on student loans, including research showing that graduates delay marriage because of their debt.
Does any of this matter for people who don't have student debt?
- Writing for the New Republic, David Dayen argues that student debt is a burden on the economy as a whole, noting that young adults waited longer to establish new households during the recovery. "A 'kids-living-in-the-basement' economy simply has no vigor," he writes.
- In The Post, Dina ElBoghady explains why it can be difficult for graduates with debt to get a mortgage for a house of their own. Banks won't lend to people who already owe a substantial amount. (Here are some depressing charts putting student loan debt in context.)
- On the other hand, Derek Thompson points out in the Atlantic that the economy is weak in general, and homeownership rates are also declining among adults without student debt.
- For more on student debt and the economy, see my article on whether the federal government makes money or loses money on its student loan programs. It's surprisingly difficult to come up with a clear answer to this question.
Okay, hit me with the PDFs.
- A white paper from the Brookings Institution summarizes all of the bad things that alumni with debt have to deal with, but notes that there are still very important benefits to a college education or a postgraduate degree.
- Beth Akers's recent paper for the American Enterprise Institute shows that often the people for whom student debt is a serious problem are those who owe a comparatively small amount. (Doctors or lawyers might owe many times more than graduates of trade schools or community colleges, but they earn more, too.)
- Research from the Federal Reserve Board of New York compares student debt to other kinds of household debt.
- These sheets from Sen. Elizabeth Warren's office and the White House explain the Democrats' proposals.