But, compared to alternative ways of financing higher education—such as greater government support for public universities and increased federal education grants—student loans can have adverse consequences. This is especially true when loans are taken on by those who don’t complete their education. For borrowers with large student loan balances, such consequences include slow or late repayment, serious delinquency, and default. 17 New York Fed researchers have shown that such unfavorable outcomes are related to family background. Thus, at times, student loans can have the perverse effect of limiting social mobility. In addition, our research indicates that, for any given level of educational attainment, workers who have student debts are less likely to own homes than those who got their education without incurring debts. Certainly, for those who have difficulty repaying their student loans, the resulting damage to credit scores will make obtaining a mortgage very difficult, especially under today’s lending standards. A student loan default, which is unhappily common, means that borrowing to buy a home is essentially impossible. And, we know that these factors—slow repayment, delinquency, and default—are most prevalent among those from modest family circumstances. This connection between rising college costs, increased student borrowing, and reduced homeownership is important for inequality and social mobility because, for the great majority of American families, increasing home equity is the major form of wealth accumulation.18 Thus, changes over the last few decades in the way that college is financed mean higher education is less able to lift people from poverty into the middle class.

Niklaus Blattner: Financial market infrastructures facing technological, economic and regulatory challenges Summary of a speech by Mr Niklaus Blattner, Deputy Chairman of the Governing Board of the Swiss National Bank, at the XI AWK Group Financial Services Lunch, Zurich, 20 September 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Smoothly and efficiently functioning financial market infrastructures form the backbone of the International Financial Centre of Switzerland. The future of these infrastructures will largely hinge on trends in Europe, which point to stronger consolidation. However, healthy competition is the prerequisite for investment and innovation incentives in a consolidated stock market and settlement environment. This would also contribute to reducing the existing inefficiencies, in particular with regard to the processing of cross-border transactions. Yet a competitive environment will develop only if market participants can choose freely among the different providers and if the infrastructures are interoperable, i.e. if the providers grant each other and their participants mutual non-discriminatory access. At present, competitive obstacles exist at the technological, economic and regulatory levels. For instance, costs for changing providers are high. Moreover, financial market infrastructures are often operated in “silo” mode – either explicitly or implicitly – with clearing and settlement being handled by only one provider. But silos impede competition. A suitable regulatory framework must therefore be created to strengthen competition.