Joseph Lawler of the Washington Examiner looks beyond the scary headlines decrying $1.1 trillion in student loan debt in the United States.
Like any other sum so big, however, $1.1 trillion is difficult to put into perspective.
It has led to alarmist headlines warning that student debt is a bubble that will start a new recession soon, when it bursts. Or that it will slow long-term growth by preventing young people from financing other major life goals, such as buying homes or starting families.
But the real problem with student loans, according to students, experts and loan counselors, is much narrower than the sensationalist reports usually indicate.
The real crisis is one of indebted dropouts. Millions take out loans to pay for a degree that they never obtain and face the burden of repayment without the earning power of a diploma.
Plans submitted by Obama, Warren and others, which would lower payments on debt, do not deal with that reality. Instead, some of the most promising solutions are coming from the states. …
… If the evidence suggests that college graduates are not threatened by their indebtedness, why then all the worry about student debt?
The simple answer is that not all student borrowers graduate.
“The people we’re worried about are totally on the other end,” said Alexander Holt, a policy analyst at the New America Foundation. “They have low balances, but they went to a really bad school, they have not graduated, the debt they have is worthless. … The time they’re spending in college isn’t paying off.”
Students who earn a bachelor’s or associate’s degree rarely default on their loans, according to research by Holt’s colleague Clare McCann. Only 3.5 percent of them do.
Instead, she found, 60 percent of defaulters did not graduate.
