CONSENSUS among economists and policy makers is a rarity, an elusive trait in a hyper-polarized political climate. However, there exists a point of exception on which there is near unanimous consensus, higher education provides the surest pathway to upward socioeconomic mobility and long-term wealth generation for individuals across all socioeconomic lines. Historically, investment in postsecondary education has carried outsize returns over the course of one’s lifetime in terms of both income growth and wealth accumulation.
Over the course of the past ten years, this fundamental pathway, and the market that enables it, has become fraught with risk and its future is far from certain. Since the beginning of the 2007-08 financial crisis, a confluence of events, from the explosion in the cost of college tuition to the stagnation of real median income, has led to a looming sense that the precipitous rise in student debt is reaching an inflection point, on the verge of a macroeconomic crisis with wide-ranging repercussions.
From 2006 to 2016, according to the Consumer Price Index maintained by the Bureau of Labor Statistics, the cost of attending college increased dramatically by 62.7 percent for higher education tuition, 88 percent for college textbooks, and 51 percent for school housing. Over roughly the same period of time, from the beginning of 2007 through the end of 2017, overall outstanding student loan debt in the United States grew from $545 billion to $1.49 trillion. As a result, we have seen a range of significant adverse effects on economic outcomes for college graduates and second-order effects on consumer credit markets. These effects range from longer periods of time spent in parental co-residence and decreased rates of homeownership to additional constraints on young borrowers looking to obtain credit cards, auto loans, and mortgages.