Despite US student loan debt passing the $1 trillion (?770 billion) mark, the idea of a systemic loans crisis is a ¡°fictional narrative¡± that hinders solutions to the real problems, according to the co-author of a new book.

The creation of a single federal income-contingent loans system would work better than offering interest rate relief to borrowers under the current system, according to Beth Akers, co-author of Game of Loans: the Rhetoric and Reality of Student Debt, to be published next month by Princeton University Press.

State-run, income-contingent loans are used in ÖйúAƬ systems including England and Australia. Although the US federal loans system offers some income-contingent repayment plans, the current variety of different loan schemes is described as ¡°impossibly difficult to navigate for consumers¡± by Dr Akers.

However, the book says that there is ¡°no evidence of a widespread, systemic student loan crisis, in which the typical borrower is buried in debt for a college education that did not pay off¡±.

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Dr Akers, a fellow at the Brookings Institution thinktank in its Center on Children and Families, told Times ÖйúAƬ: ¡°What happens when we talk about this fictional narrative is we miss the fact that there are very real problems ¨C and the solutions that come out of the discussion of this fictional narrative in fact don¡¯t solve the real problems we have on the table.¡±

Plans for student loan interest rate cuts from Democratic politicians including presidential nominee Hillary Clinton were ¡°a great example of mischaracterisation of the student loans crisis leading to a solution that just doesn¡¯t solve the real problems that we¡¯re facing¡±, Dr Akers added.

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She also said that ¡°when we look at who is struggling financially, in fact it is not the people with the largest debt burden...who tend to have the highest earnings [after graduation]",?but those who may have ¡°very low balances but also low earnings potential¡±.

The book, co-authored with Matthew M. Chingos, senior fellow at the Urban Institute, cites figures from the Federal Reserve Bank of New York suggesting that total outstanding student debt passed $1 trillion in 2013.

¡°I see that as a symptom of a growth in investment in human capital,¡± said Dr Akers. ¡°Whereas to some people it¡¯s a very scary number, to me it reflects something we generally think of as a positive thing.¡±

Dr Akers said the risk of investing in ÖйúAƬ ¡°works out just fine for a large number of students ¨C the ones who see those positive returns that are happening on average statistically ¨C the problem comes from people who basically play the education lottery but lose.

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¡°These income-driven repayment systems are really a great way of providing a social insurance that provides relief only to people who are in that position of having made the investment and having it not pay off.¡±

Dr Akers said that although making public college tuition free ¨C as Ms Clinton has proposed doing for the majority of US families ¨C would be a ¡°viable¡± way of ¡°mitigating the risk entirely and placing it on to taxpayers rather than individual students¡±, it was also seen by some as ¡°a very regressive policy¡± as ¡°a lot of the benefits of free college would accrue to the people who are already very well off¡±.

She said that Ms Clinton¡¯s ÖйúAƬ plan was ¡°well thought out ¨C whether I agree with it or not¡± and also included language that ¡°makes me think that one of the pieces [in the policy plan] would be to move towards a more universal repayments system, which would likely be income driven¡±.

john.morgan@tesglobal.com