The impact of $1.2 trillion in student loans on the economy and the relationship between loan servicers and borrowers is coming under scrutiny at two U.S. Senate hearings today.
Education debt is increasing as students and parents depend on loans to fund college and graduate school amid escalating costs. Rising default rates show they are also struggling to repay.
The issue is no longer confined to consumer advocates, as leaders in industries including housing and autos voice concern that debt erodes consumers’ ability to spend, according to advance testimony by Rohit Chopra, student loan ombudsman for the Consumer Financial Protection Bureau.
“We go to college to open doors, to pursue what we truly want out of a fulfilling life,” Chopra said in the text of testimony planned for the Senate Budget Committee’s hearing on education debt and the economy. “Massive student debt debilitates this mission. Ignoring the warning signs may prove to hold back not only the future growth and dynamism of our economy, but also our spirits.”
The Senate Banking, Housing and Urban Affairs Financial Institutions and Consumer Protection Subcommittee, at a concurrent hearing, plans to focus on companies that service federal and private loans. Navient Corp., until last month part of SLM Corp., known as Sallie Mae, is the largest servicer of federal loans. More than 85 percent of education debt is backed by the federal government.