If you read the US papers at all, you’ll have noticed a recent ratcheting-up of panic about student debt.  Take Charles Blow’s recent New York Times column, which describes US debt levels  as “staggering”, and having “long-term implications for our society and our economy, as that debt begins to affect when and if young people start families or enter the housing market.”

Some facts are in order.

It is certainly true that, in the United States, it’s possible to accumulate some absolutely staggering amounts of student loan debt, to no good purpose.  Law grads, in particular, routinely rack up six-figure debts, only to end up in positions with mid-five-figure salaries (do read Paul Campos’ Don’t Go to Law School (Unless) – it’s an eye-opener on this topic).  But those numbers are severe outliers.  In fact, among the 60% of American students who borrow, the average debt is about $27,000 – with median debt being somewhat lower.

Sound familiar?  It should.  Those numbers are almost exactly the numbers we’ve had in Canada since the turn of the century.  And though life isn’t as easy for young people with loan debt today as it was thirty years ago, it’s not as though the last decade’s worth of graduates are some kind of immiserated proletariat.  Against expectations, the rise in debt in the 90s didn’t reduce access (quite the opposite, actually), and it didn’t lead to a generation of debt peonage.  In fact, grads in their late 20s and 30s live pretty much the way they always have.  True, home ownership rates have fallen among the under-40s, but that has at least as much to do with a historic rise in house prices as it is does student debt.  In short, current levels of debt don’t have major behavioural or life-course consequences.

So, are Americans freaking out to no good purpose?  Only partly.  There are two good reasons why a similar level of debt in the US might be more consequential than it is here.  The first is that, with weaker safety nets, the consequences of falling into poverty are much, much worse.  The second reason is that the US student loan policy choices have been sub-optimal.

In Canada, thanks to Interest Relief (and later, the Repayment Assistance Program), students with incomes into the mid-$20,000s are exempt from making payments on their loans.  In the US, the threshold for loan deferment is, in practice, about half that, meaning that, unlike in Canada, some very poor borrowers can be required to make large loan payments.  America could have copied us in ensuring a good safety net for the poorest; instead, they chose to subsidize student loan interest rates across the board, regardless of need.

High levels of student debt are manageable.  It just takes good policy choices.