Courtesy of Pam Martens.
President Barack Obama Speaking at Henninger High School in Syracuse, New York, August 22, 2013
President Obama finished up his August bus tours with speeches to high school and college students on his plans to make college more affordable. The President’s slogan of “college affordability” belies a growing crisis in the U.S. – student loan debt has now eclipsed credit card debt and stands at $1.2 trillion according to the Consumer Financial Protection Bureau (CFPB).
The Financial Stability Oversight Council (F-SOC), a unit of the U.S. Treasury, warned in its 2013 annual report that high levels of student debt could have severe negative impacts on the U.S. economy, writing that it could “impact demand for housing, as young borrowers may be less able to access mortgage credit. Student debt levels may also lead to dampened consumption.”
According to F-SOC, while household debt in general became more current on payments last year, 11.7 percent of student loans were more than 90 days delinquent. The report noted that heavy student debt burdens and a poor job market are contributing factors that are pushing borrowers into delinquency.
Acknowledging these alarming trends, the CFPB issued a call for public comment in February of this year, seeking ideas for making college more affordable and asking students and community groups to report their experiences with private student loans – those made predominantly by banks. The CFPB received almost 30,000 responses, including an outpouring of horror stories from desperate and despairing young people who were skimping on heat and food as they watched their original loan amount double in size from unexplained penalties, fees and hiked interest rates.
The President’s promises to work on plans to make college more affordable should not preempt a Congressional and U.S. Department of Justice investigation into whether lending laws have been violated. These young people, in many cases, provided their names and addresses to assist in getting to the bottom of whether serious crimes have been committed. Indeed, numerous regulatory reports draw a comparison to what is happening with student loans and what happened in the big banks’ questionable and, frequently unlawful, mortgage lending practices, leading to the housing collapse.
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