Consumer bureau: Student loan debt hurting economy

{mosads}For example, there were 2 million more young Americans living with their parents in 2011 than in 2007. “If student debt is holding back just a third of those 2 million Americans from living on their own, that adds up to $100 billion of lost or delayed economic activity,” said Rohit Chopra, the CFPB’s student loan ombudsman, using estimates from the financial evaluators Moody’s Analytics.

“We hear from many who say they just need to live with their parents to weather the storm until they can earn more or until they can tackle some of this debt,” Chopra added. “But that may mean that a lot of them are actually not able to form their own households or buy a home, which could lead to delayed economic activity.”

“Today’s report warns of the potential domino effects on the economy of high student debt,” CFPB Director Richard Cordray said in a statement announcing the publication.

In the report, the bureau makes a case for alleviating the debt burden for recent graduates who may have had fewer job opportunities as a result of graduating into the recession. Borrowers should be allowed to refinance their loans, it argues.

“If these borrowers could refinance, their debt would be much more manageable,” said Cordray in remarks prepared for a Wednesday evening hearing in Miami, Fla. “Given today’s historically low interest rates, there is a tremendous opportunity for lenders to take advantage of an underserved market.”

Many borrowers with high student loan debt owe money on private loans, which tend to have higher interest rates and are less flexible than federal loans.

“We’ve done a lot to provide federal student loan borrowers with key protections and affordable repayment options so they can successfully repay their loans, and we have made it easier for them to pursue public service careers,” added a statement from Education Secretary Arne Duncan.

“While federal loans remain a student’s best option, the CFPB’s important work highlights that many students are struggling to repay debt from private lenders, identifies obstacles that hinder lenders from providing borrowers with more options to better manage their debt, and provides thoughtful options for addressing these challenges that deserve policymakers’ serious consideration.”