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Editorial: U.S. Student Loan Debt Needs a Reality Check

As federal regulators take action to make the mortgage industry implement reasonable standards designed to ward off the kinds of abuses that helped crash the economy, student loan debt is skyrocketing. So much so that student debt — exceeding $1 trillion — is more than Americans owe in credit card debt.

It’s another bubble with the potential to harm the economy that is being inflated at an alarming rate.

Last year, the average student had loan debt of $27,253, compared to $17,233 in 2005. The delinquency rate is 15 percent. Keep in mind that unpaid student loan debt generally isn’t discharged in bankruptcy proceedings, although a fair amount of ends up being forgiven under various federal programs.

U.S. government lending makes up a vast chunk of student loan debt. Direct student loans like Stafford loans are based on need. Credit worthiness or projected ability to repay are not considered.

But maybe they should be.


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By comparison, coming next year are mortgage lending rules from the new Consumer Financial Protection Bureau requiring a greater degree of reporting and responsibility from both borrowers and lenders.

While predicting future job markets for student borrowers might be dicey, shouldn’t there be some consideration of ability to repay? Otherwise, why call it a loan? What are the ethics of a system that encourages young people to rack up huge debts they have little chance of repaying?

It may take some changes in eligibility and possibly congressional action, but it’s worth a serious discussion before this bubble also bursts.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.