A new Brookings paper, released yesterday as part of the Brookings Papers on Economic Activity (BPEA) Fall 2015 Conference, is generating headlines for its new and significant contribution to the understanding of student debt issues in the United States. In “A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan defaults,” authors Adam Looney of the U.S. Treasury Department and Constantine Yannelis of Stanford University effectively overcome the data limitations that have long encumbered research and policymaking in this area. They do so by linking Department of Education data on student borrowing with earnings information derived from de-identified tax records.
Looney and Yannelis’s innovative research reveals important findings about who’s borrowing and who’s defaulting. “To the extent there is a crisis,” write the authors, “it is concentrated among borrowers from for-profit schools and, to a lesser extent, two-year institutions.”
A video from the Brookings Creative Lab further explains the paper’s findings: