Student loan debt is now over $1 trillion, according to Officials at the Consumer Financial Protection Bureau, a federal agency created after the financial crisis. The officials presented their findings at a banking conference in Austin, Texas yesterday.
This estimate is about 16% higher than the one given by the Federal Reserve Bank of New York earlier this year. The Bureau explains the difference between their findings is that they are based on a survey of private lenders, whereas other estimates are taken from samples of consumer credit reports.
The massive increase in student loan debt is related to a combination of issues. First, more people are going to school, because of the weak labor market. Second, many institutions are raising tuition, because of big cuts in state funding. Therefore, not only are more people going to college, but they are also forced to take out bigger loans.
The study suggests that a third reason for the student loan debt increasing is that people who have already graduated are struggling to pay their loans, causing the interest to compound, and them to fall behind even more. Data from the New York Federal Reserve Bank says that as many as one in four student borrowers who have started to repay their loans are behind on their payments.
These findings are especially troubling for the housing market, which is still trying to recover from the recession. This is because people with more debt are less likely to buy their first home.
Rohit Chopra, of the Consumer Financial Protection Bureau, said the following in a speech at the Austin banking conference:
“First-time home-buyers are a substantial part of the housing market…instead of saving for a down payment, these borrowers are sending big payments every month.”
Economists still say that, despite the debt from going to college, it is still a good investment, because eventually, having a degree and extra skills will help workers get a better paying job, which will ultimately offset the student debt.
Are you one of the millions of Americans still paying off your student loans? If so, how have they affected your life?