The good news about student loans

From Axios.com

For the first time since the early 1980s, tuition inflation is lower than the rate at which consumer prices are rising, according to a new research paper from S&P Global Ratings.

The big picture: Baumol's cost disease, which says that tuition fees are always going to rise faster than inflation, might not be an iron law after all. It's been a decade since Congress increased the amount that undergraduates could borrow from the government, which is effectively constraining tuition increases.


Is there a crisis in student loans? Maybe not.

  • Student debt burdens can be extremely unpleasant for individual borrowers, but they don't seem to be impeding the progress of the economy more broadly. The Americans with the highest student-debt burdens also tend to be the Americans most able to repay those loans: doctors, lawyers, and other professionals.

  • The highest student-loan default rates are found among the students with the lowest student debt burden: borrowers who owe the government less than $5,000.

  • The median ratio of educational debt to income for households under 35 fell 5 percentage points between 2013 and 2016. The situation isn't great, but it's getting better, not worse.

Yes, but: The stock of student debt is already dangerously high, at $1.5 trillion and rising. It has grown by 157% in the past 11 years, even as mortgage and credit-card debts outstanding have remained largely flat.

  • More than 10% of borrowers are more than 90 days behind on their student loans.

The bottom line: "Stronger income growth and slower cost increases are working to bend the leverage trend," as S&P puts it. "This trend of rising student debt isn't necessarily a bad thing. Education is an investment in human capital, and if the skills acquired are valued by employers, then going to college carries a positive net present value — even with debt financing."

From Axios.com