In June 2010, total student-loan debt passed total credit-card debt for the first time, and the total amount owed now approaches $1 trillion. Anecdotes about unemployed grads with $100,000 in unpaid loans abound. But what if the greater problem were that some people who should be taking out educational loans are failing to, or that borrowers aren’t borrowing enough?
The situation isn’t either-or, obviously — over-borrowing can co-exist with under-borrowing — but a new analysis of student debt puts the focus on the latter. Or, to put it more mildly, it stresses that most current educational borrowing is wise. An overemphasis in news coverage of students drowning in debt, argue Christopher Avery and Sarah Turner, in the latest issue of the Journal of Economic Perspectives, is scaring people away from taking on healthy debt. Art-history majors who are $100,000 in the red and unemployed exist, to be sure, but accepting them as typical amounts to a species of “cognitive bias,” Avery and Turner argue.