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Bernanke Says Student Loans Won’t Cause Crisis

Federal Reserve Chairman Ben S. Bernanke said record U.S. student loan debt doesn’t put the financial system at risk the way mortgages did because most educational borrowing is backed by the government.

“I don’t think it’s a financial stability issue to the same extent that, say, mortgage debt was in the last crisis because most of it is held not by financial institutions but by the federal government,” Bernanke said today at a town hall meeting with teachers at the Fed in Washington.

Outstanding educational debt, which includes loans taken out by students and their parents, is estimated at $1 trillion, according to the Consumer Financial Protection Bureau. About 15 percent is private student loans, issued by lenders including banks. The rest is backed by the government.

To contact the reporters on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net; Janet Lorin in New York at jlorin@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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