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Student Debt Could Hold Back Economic Growth, Should Be Discharged In Bankruptcy

Thursday March 1, 2018 comments

Burgeoning levels of student loan debt could slow down economic growth over time, Federal Reserve Chairman Jerome Powell said Thursday.

Education debt swelled to nearly $1.38 trillion at the end of 2017, with 11 percent of borrowers 90 days or more delinquent, according to the New York Fed. Policymakers have sought ways to keep the student loan problem from swelling out of control but have struggled to come up with solutions.

While the issue is primarily one for Congress to tackle, Powell said it could become an economic question.

"You do stand to see longer-term negative effects on people who can't pay off their student loans," he said. "It hurts their credit rating, it impacts the entire half of their economic life."

Powell said he generally supports the idea of a vibrant education loan climate, but added that borrowers need to be informed of the risks they're taking.

He also wondered why student debt can't be discharged in bankruptcy.