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

Susan M. Dynarski
prof susan dynarski 08
Susan M. Dynarski Professor of Public Policy, Education, and Economics - University of Michigan

September 18, 2014

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 U.S. 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 United States. I close with a discussion of the gaps in the data required to fully analyze and steer student-loan policy.