Study Shows Student Debt Hurts Economy

The Consumer Financial Protection Bureau released a report this week outlining the effects of private student loan debt on the economy.

Congress realizes that student loans are more of a strain on society than ever, and Congress created the Consumer Financial Protection Bureau to analyze student loans and make recommendations to policymakers. "The Dodd-Frank Wall Street Reform and Consumer Protection Act established a student loan ombudsman within the Consumer Financial Protection Bureau to focus on student loans. Pursuant to the Act, the ombudsman shall conduct analysis on input from borrowers, prepare an annual report, and make appropriate recommendations to policymakers, including the Director of the Consumer Financial Protection Bureau, the Secretary of the Treasury, and the Secretary of Education."

The report solicited feedback in a number of areas, including

  • How student loan burdens might impact the broader economy; 
  • How distressed borrowers manage their student loan obligations; 
  • What options currently exist for borrowers to lower their monthly payments on student loans; 
  • Examples of successful alternate repayment programs in other markets and which features could apply to the market for private student loans; and 
  • The most effective mechanisms for communicating with distressed borrowers.

The report notes that "[w]ith collective student-loan debt now totaling more than $1-trillion and far outpacing wage growth for college graduates, borrowers are less likely to take financial risks that would normally help fuel economic growth." This includes consumer spending, buying a house, or marrying because of the financial implications of student debt.

This information is common knowledge these days, but, I have to say, it's refreshing to see this type of report and that policymakers are paying attention to the concerns of the people. For real reform, the main thing that needs to be considered is the cost of tuition at all levels of higher education.

The Chronicle of Higher Education -- Rising Student-Loan Debt Hinders Spending and Hurts the Economy, Reports says


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