Student loan problems could hold back economic growth, Fed chief says

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

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.

“I’d be at a loss to explain why that should be the case,” he said.

While he said he couldn’t quantify what the longer run economic effects would be, he said there is danger down the road.

“It will over time,” he said when asked whether student debt could undermine broader economic growth. “It’s not something you can pick up in the data right now. As this goes on and as student loan continues to growth and becomes larger and larger, then it absolutely could hold back growth.”

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