Consumer Protection Agency Says Previous Estimates Were Too Low, Student Debt Already Exceeds $1 Trillion
Last year, the New York Federal Reserve estimated that student loan debt would exceed $1 trillion for the first time in 2012. At the moment, the New York Fed claims that $870 billion in student loan debt is outstanding.
However, the Consumer Financial Protection Bureau — the agency created by the Dodd-Frank financial reform law, which is tasked with policing consumer lending — believes that the New York Fed is underestimating the amount of student debt that Americans hold. In fact, a CFPB analysis shows that student debt has already cleared $1trillion:
Total student debt outstanding appears to have surpassed $1 trillion late last year, said officials at the Consumer Financial Protection Bureau, a federal agency created in the wake of the financial crisis. That would be roughly 16% higher than an estimate earlier this year by the Federal Reserve Bank of New York.
The new figure—released Wednesday at a banking conference in Austin, Texas—is a preliminary finding from a study of student debt that the bureau plans to release this summer. Bureau officials said the estimate is based on a survey of private lenders, as opposed to other estimates that rely on a sampling of consumer credit reports.
That the debt number is this high is a sad result of the fact that, since 1985, the cost of college tuition and fees has nearly sextupled, while financial aid has failed to keep up. This month, 80 percent of bankruptcy lawyers said in a survey that they’ve seen a substantial increase in clients buried in student debt.
A study released yesterday shows that “almost two-thirds of U.S. student- loan borrowers misunderstood or were surprised by aspects of their loans or the student-loan process.” The CFPB began accepting complaints regarding the student loan industry this month.