How Can Public Policy Help?

Abstract

The most important strategy for ameliorating student debt problems is preventing people from borrowing for programs they are unlikely to complete and institutions that won’t serve them well. There should also be stricter limits on borrowing for graduate students, parents, and some undergraduates. Major steps for dealing with existing debt include an improved income-driven payment system that appropriately supports borrowers while expecting most to repay their debts in full and improving the structures surrounding the repayment and collection processes—but not forgiving all or most debt. Other promising policy changes include easing the restrictions on discharging student debt in bankruptcy, eliminating the privileged category of private student loans, and making it easier for students to borrow less than the maximum allowed.