U.S. student-loan debt reached the $1 trillion mark, as young borrowers struggle to keep up with soaring tuition costs, according to the initial findings of a government study.
The figure, which is higher than the country’s credit-card debt, was probably reached “several months ago,” Rohit Chopra of the Consumer Financial Protection Bureau, said in a posting yesterday, excerpted from a speech he made at the Consumer Bankers Association meeting in Austin, Texas.
“Young consumers are shouldering much of the punishment in the form of substantial student-loan bills for doing exactly what they were told would be the key to a better life,” Chopra, the bureau’s student-loan ombudsman, said in the posting.
More students are taking out loans to pay for college as tuition increases. Undergraduates are limited by the amount they can borrow in federally backed loans. Students also take out private loans, which lack the income-based repayment and deferment options of federal ones, Chopra said.
Excessive student debt could slow the recovery of the housing market, as young people repay money for their education rather than buying homes, said Chopra, who called the results “sobering.”
‘So Many Borrowers’
“Federal student-loan debt isn’t growing just with new originations,” he said. “With so many borrowers unable to keep up with interest payments, debt is growing even for many who have left school.”
The Federal Reserve Bank of New York last month said debt from educational loans in the U.S. rose to $867 billion in the fourth quarter of 2011, based on figures from a sample of data provided by the Equifax Inc. credit bureau. The New York Fed also said this month about 10 percent of the outstanding student loan balance was delinquent in the third quarter.
The Consumer Financial Protection Bureau was created by the 2010 Dodd-Frank Act to help consumers understand financial products including student loans, mortgages and credit cards. It plans to release its full report this summer.