A Brookings Institution report this week downplayed the impact of rising student loan debt, implying that there is no crisis and much of the worry is misplaced. Because most people with student debt don’t believe their problems only exist in their heads, the report has spurred a contentious debate, particularly about its methods.
That’s bad enough. The bigger question about the report should concern its scope: the larger economic forces that are holding back the financial progress of people with student loans.
The best reason to take student loan debt seriously – as the crisis it is – is so that we don’t blind ourselves to the consequences of rising defaults, longer debt repayments and how this affects the psychology of a whole generation.
Having a significant segment of the economy preoccupied with debt hurts the economy as a whole: if it means that large purchases get put off, young people don’t start businesses or form new households, and everyone stops taking risks. Playing it safe is, in general, very bad for economic growth.