As the Trump administration said on Wednesday it had hired consulting firm McKinsey & Co. to evaluate the U.S. government's student loan portfolio, some experts suggest burgeoning fears for the U.S. economy regarding student debt might be overblown.
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Citing a research note sent out this week, a chief economist at Deutsche Bank, Torsten Slok, said the student loan issue is not necessarily a problem that concerns the U.S. economy as a whole.
“It is a very unfortunate situation for a big group of individuals, and this is a very serious problem for many families across the country,” Slok said in a statement to FOX Business. “But … it is just not a problem for the macro economy.”
Deutsche Bank’s research found that about 14 percent of the U.S. population have a student loan. Most of those balances are between $10,000 and $25,000. Less than 1.0 percent of the population has a balance that is greater than $100,000. Therefore, the firm concluded the issue is more of a micro economic concern, rather than a macro one.
Outstanding student loan debt hit $1.46 trillion at the end of last year, according to data from the Federal Reserve Bank of New York, second only to mortgage debt as a share of Americans’ total debt burdens.
Billionaire hedge fund manager Ken Griffin on Tuesday said education is the cause of America’s largest problems, due to costs, and the lack of understanding about debt and economic prospects.
In terms of student loans, Griffin warned that areas where the government is most heavily involved with subsidizations is “where we often see the economy break down the greatest.”
JPMorgan CEO Jamie Dimon in January named student loans as a big risk to the U.S. economy, citing a ”lack of discipline” and the fact that student debt is largely owned by the government, not the banking sector.
Lawmakers, too, are attempting to tackle the issue head on. Massachusetts Democrat Elizabeth Warren – a 2020 presidential candidate – recently unveiled a $640 billion proposal to wipe out student debt burdens for some borrowers, and provide at least some relief to about 95 percent of borrowers.