US Treasury sounds alarm over student loans as defaults increase
May 1, 2014, 12:03 am TWN
WASHINGTON--Deputy U.S. Treasury Secretary Sarah Bloom Raskin sounded the alarm Tuesday on student loans in the U.S., where the number of people defaulting is on the rise.
At least 40 million people have taken out a student loan, Raskin said, and by the time students graduate, the average amount of loans is US$30,000, and they will spend ten years or more repaying.
And many never manage to repay them at all, Raskin said during a speech at the University of Maryland.
"While delinquency rates on many other types of debt have fallen in recent years, delinquencies on student loan debt are rising," said the Treasury Department number two, noting that some seven million Americans had defaulted on their student loans.
At the end of 2013, the total amount of U.S. student loans approached US$1.1 trillion, well above the total amount of credit card debt in the country.
And the percentage of students graduating with debt is on the rise — 60 percent of graduates in 2012, compared to just 30 percent in 1993.
"These numbers are daunting; to what extent should we be concerned?" Raskin asked, emphasizing that such figures could have an impact on the rate of economic growth in the country.
Late payments and defaulting on student loans could later hinder the borrower from being able to get other loans, including mortgages and car loans.
And sometimes, she said, defaulting on a student loan could hinder a candidate from getting a job, because employers often check credit history and consider past problems to be a sign of irresponsibility.
The large majority of student loans in the United States are financed by the federal government, but distributed by agents or private banks.
Raskin, who left the Federal Reserve to join the Treasury Department last month, called on these lenders to make it easier to modify payment plans for borrowers who find themselves struggling to meet their obligations.