Eye on Housing

On July 1^st, among other changes, interest rates on newly originated Stafford student loans are scheduled to increase from 3.4% to 6.8%. Due to this looming deadline, there has been a lot of attention paid to the rising amount of student loan debt. Some of this commentary goes as far as saying that recent data indicate a bubble exists for student loans, one that will burst with negative consequences for housing and other parts of the economy.

The analysis below indicates that some of these claims may be exaggerated. It is true that outstanding student loan debt has risen. But the data suggest that, in part, this rise in explicit student loan debt is in fact a shift of the source of higher education financing – one related to housing itself. Namely, with the onset of the housing crisis, there was a decline in the availability of home equity loans…

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