Student loan debt appears to have recently surpassed $1 trillion, far higher than previous estimates had indicated, according to the federal Consumer Financial Protection Bureau (CFPB).
“Unlike other consumer credit products, student debt keeps growing at a steady clip,” said Rohit Chopra, the bureau’s student loan ombudsman, in a speech last week to an Austin conference. “Students borrowed $117 billion in just federal student loans last year.”
The CFPB, established in 2010, is conducting what it describes as “the first major effort to understand the size of the student loan market,” which it supervises. Chopra called the study’s initial findings “sobering” and indicative of a market that is “too big to fail,” a term that has come to signal possible risks to the stability of financial markets.
His remarks came several weeks after Federal Reserve Chairman Ben Bernanke warned Congress that the rapid growth in student loan debt required “careful oversight” from regulators. On a personal note, Bernanke said in congressional testimony that his son was likely to run up $400,000 in debt by the time he graduated from medical school.
“Too much debt,” Chopra said, “means too much risk for a generation of young people, many of whom are struggling in today’s economy.”
The Concord Coalition points out that Washington is also putting younger Americans at risk by building up enormous federal debts and other unfunded government liabilities that, absent reform, will weaken the economy and diminish the U.S. standard of living. Excessive student loan debt also makes it more difficult for young people to set aside money for everything from their first homes to their retirements.
“The financial services industry, the higher education community, and policymakers all bear responsibility to address the underlying causes of the growing debt levels,” Chopra said. His agency plans to release the full results of its study on student loans this summer.