How do federal student loans affect the national debt?


Did you know that the federal government is the direct lender of nearly all student loans in the United States, lending trillions of dollars to millions of borrowers to help increase access to higher education? Since the amount of funding for new student loans exceeds the amount of repayments of existing loans, the government must borrow the difference, which adds to the national debt.

Student debt held has steadily increased since the federal government moved to direct lending. This growth was spurred by factors such as skyrocketing tuition fees, an increase in the number of students attending college, widening loan limits and programs aimed at providing relief to some borrowers. Much of the current stock of student debt has accumulated since the Great Recession, and many of these new borrowers are struggling to repay their loans, both before and during the economic turmoil caused by the pandemic.

To better understand the relationship between student loans and our country’s finances, the Bipartisan Policy Center recently released a report examining the ways in which the important role of government in funding higher education affects our fiscal outlook.

Read the Bipartisan Policy Center report

Related: How Does Student Debt Affect the Economy?

Image credit: Barry Winiker/Getty Images


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