Student Debt, America's Avoidable Disaster

The US is about to conduct a perilous economic experiment: In September, some 45 million borrowers will have to restart payments on student loans after three and a half years on hold. Whatever the consequences, one must hope they’ll inspire a deeper rethink of the way the country finances higher education.

The outlook isn’t good. Judging from data on their non-student debt, borrowers are already struggling. The median cost of servicing that other debt has increased 24% since the pandemic began, reflecting higher interest rates and larger balances on auto loans and credit cards. Delinquency rates, while still low by historical standards, are on the rise: As of March, nearly 8% of borrowers were at least 60 days late on payments, up from less than 5% in July 2021. Worse, the delinquencies are concentrated among middle-aged borrowers with high balances, who should be in their highest-earning years.