While high-balance borrowers represent just a small share of the individuals with outstanding student loans, they owe over half the outstanding balances. Though high-balance borrowers default at a relatively low rate, the risk they pose to taxpayers is substantial. In addition, Looney and Yannelis find that the rate at which high-balance borrowers repay their loans is slowing down. The best way to limit the risk that high-balance borrowers pose to taxpayers is to stop creating so many high-balance borrowers in the first place. Congress could cap or even eliminate federal student loans to graduate students, which represent the bulk of high-balance loans.

Source: Forbes February 20, 2018 14:48 UTC