Could it be the next financial crisis? The US government has a portfolio of approximately one trillion dollars in student loans, many of which appear to be troubled. Student loans represent the second largest source of consumer debt in the United States exceeded only by home mortgages.
As reported by the New York Times, the U.S. Department of Education oversees the portfolio, but officials at the US Treasury, Federal Reserve and the Consumer Financial Protection Bureau have expressed concerns regarding the quality of oversight. As many remember, several years ago, the nation’s mortgage crisis caught policymakers and investors flatfooted, resulting in delayed and inadequate policy responses to the global financial crisis.
There is plenty of data regarding the mortgage market today, but there actually isn’t much statistical detail regarding what’s going on in in the student loan market. The Federal Reserve strives to maintain an understanding of household debt trends and has purchased credit records from Equifax that allow it to monitor trends in study debt. These records are better than nothing, but lack critical details regarding loan terms and the college the borrower attended.
