WASHINGTON May 8 The U.S. Consumer Financial
Protection Bureau warned on Wednesday that the economy will soon
feel the effects of surging student loan debt unless steps are
taken to ease the burden on existing borrowers.
The agency, charged with protecting consumers from the
financial markets, reported its findings at a public hearing in
Miami, Florida after analyzing about 28,000 responses from
individuals, consumer groups and other organizations to a
February query on the effects of student loan debt.
U.S. student loan debt, which now exceeds $1 trillion, has
come under focus as lawmakers and economists debate its affect
on the economy.
According to a CFPB analysis, student debt affects
borrowers' credit and may limit their ability to start small
businesses, save for retirement or invest in new homes or cars.
Rural communities are struggling to attract healthcare
professionals and teachers who take higher-paying urban jobs
that allow them to pay off debt, the CFPB said.
"We hear from many who say they just need to live with their
parents until they weather the storm or tackle this debt, which
could lead to delayed economic activity," Rohit Chopra, the
CFPB's student loan ombudsman, told reporters.
Americans aged 18-to-34, who decide to live with their
parents to cut expenses, account for about $100 billion in
withheld or delayed spending that would be pumped into the
economy if they set up new households, Chopra said.
Student loans are the only kind of debt that continued to
rise through the financial crisis, according to data from the
New York Federal Reserve Bank. The average borrower owes about
Delinquency rates also have spiked, as the lingering effects
of the recession make it difficult for recent graduates to find
jobs. About 6.7 million borrowers - out of 37 million - are at
least 90 days delinquent on loan payments, the New York Fed
Recent discussions among lawmakers in Washington have
focused on making student loans more affordable for future
borrowers. Fewer solutions have been offered for easing the
burden of already existing debts.
The agency called for refinancing as a way to offer some
relief to existing borrowers and allow them to take advantage of
historically low interest rates.
"With improved credit, many borrowers could get ahead and
climb the economic ladder," Chopra said. "Most borrowers aren't
looking to get off the hook-they are just looking for a
repayment system that works."
(Reporting By Elvina Nawaguna; Editing by Marilyn Thompson and