Treasury Deputy Secretary (and former Fed member) Sarah Bloom Raskin spoke about the $1.1 trillion in outstanding US student loans today.
“This sobering reality has consequences not just for the individual student carrying large student debt, but for the economy as a whole,” Raskin said in remarks prepared for delivery to the National Association for Business Economics.
Raskin said that no one at the Treasury expects a “meltdown” in student loans but also lamented the lack of data and studies on the wider effect of student loans on the economy.
For me there are two options about how the huge overhang of student debt will play out and they’re equally frightful:
- We hit some kind of tipping point and have a crisis
- The large debt loads restrain long-term growth
For me, there’s just too much debt out there for it to end well. Another option might be some kind of student loan QE from the Fed but operationally that might be extraordinarily difficult. It also raises the question: Why should the Fed be picking winners and losers in QE between MBS and student loan securites?