As of 2013, outstanding student loan balances in the US exceeded $1.2 trillion, more than any other type of household debt with the exception of mortgages. Following several years of rapid growth in outstanding loan volumes, student debt burdens have attracted increased attention in recent years. This policy brief reviews trends, issues, and policy options related to student loans.
Federal student loans offer several important benefits. They help students attend institutions of higher education and help families cover or defer the costs of attendance. However, like other loans, student loans need to be repaid, which can strain borrowers’ income and affect other economic choices. From the outset, we note that isolating the impacts of student loan debt is a difficult exercise. Student loan debt represents debt undertaken to finance an investment in human capital. Simply comparing the financial and economic circumstances of households with and without student debt can be misleading if it does not also account for the additional earnings capacity produced by the education that was financed by that debt. Put differently, the key question is how the combination of the debt-financed education and student loan debt affect outcomes. To date, few studies have been able to measure both aspects of student loan debt, and thus have instead focused on either the effects of education or the impacts of student loan debt. In this survey, we focus on student loan debt, but the fact that the debt is financing additional education should provide important context for interpreting the results.