An Economist's Perspective on Student Loans in the United States

September 2014
Susan Dynarski

In this paper, I provide an economic perspective on policy issues related to student debt in the United States. I lay out the economic rationale for government provision of student loans and summarize time trends in student borrowing. I describe the structure of the US loan market, which is a joint venture of the public and private sectors. I then turn to three topics that are central to the policy discussion of student loans: whether there is a student debt crisis, the costs and benefits of interest subsidies, and the suitability of an income-based repayment system for student loans in the US. I close with a discussion of the gaps in the data required to fully analyze and steer student-loan policy.

Comments welcome: This paper was prepared for the 2014 East-West Center/Korean Development Institute Conference on a New Direction in Human Capital Policy. This research was partially supported by a grant from the Spencer Foundation. All views and errors are my own.