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Student loans are a special kind of debt. They are an investment to increase someone’s future earnings, though they must be paid back before most of those earnings are realized. Most of the loans are directly from the government, which not so long ago was telling borrowers they wouldn’t have to pay them back, and didn’t require them to. They are among the few kinds of debt that can’t be discharged in bankruptcy. They also have one of the highest rates of default.
A new research paper argues that all these facts may be related. During and just after the pandemic, there was a moratorium on student loan payments, and the government even promised to forgive much of the debt. The Supreme Court put an end to that idea in a 2023 decision — and since payments have resumed, more borrowers than ever are delinquent.
The high delinquency rates are often attributed to financial hardship, which is related to the affordability crisis. No doubt some borrowers are finding it hard to make their payments. But the paper says that the uncertainty around debt repayment is a big reason that many people aren’t paying back their loans.
All this confusion, the paper says, resulted in making borrowers worse off. Some will end up paying more in interest, carrying even more debt and damaging their credit.
Read the whole thing. New Leadership Can Move the UK Past Brexit — Michael R. Bloomberg The Supreme Court Endorses America’s Abandonment of Human Rights — Noah Feldman Porsche and Mercedes Are Feeling the Pull of the American Highway — Chris Bryant The Supreme Court Just Undercut Homeowners — Stephen L. Carter The British Are Cursed By Their Exaggerated Self-Importance — Max Hastings Trump Is Trapped in a $14.7 Million Algae Pond — Nia-Malika Henderson Anthropic and OpenAI’s No. 1 User Might Not Be Enough — Parmy Olson Meta Makes a $900 Million Super-App Move in India — Andy Mukherjee Public Schools Are Failing to Prepare for Fewer Kids — Justin Fox
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