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December 18, 2014

Johnson urges coordination on student loan issues

Senate Banking Committee Chairman Tim Johnson, D-S.D., urged the Department of Education, Treasury and CFPB to work together on issues surrounding the student loan market, including student loan servicing and debt collection, in individual letters sent Wednesday.

"While college still represents one of the surest paths to the middle class, rising student loan debt makes it increasingly difficult for graduates to buy a house, start a business, or save for retirement," Johnson said in a statement Thursday. "In my home state of South Dakota, one of the states with the highest proportion of students graduating with debt, nearly three-fourths of graduates finish school with over $25,000 in debt."

Johnson pointed out in his letter that student loan debt has swelled "to be the largest form of consumer debt after mortgage debt and currently stands at $1.2 trillion." He encourages the agencies to undertake a "serious study of the market for refinancing student loans and develop a plan to enable borrowers to take advantage of the current low interest rate environment."

A Wall Street Journal blog post from Wednesday notes that lenders gave out $7.04 billion private student loans for the 2013-14 academic year, which is up 6 percent from the past year and 25 percent from 2010-11. The post also notes that lenders wrote off only 2.4 percent of loan balances as losses in the third quarter, down from 3.1 percent last year, according to a report released Wednesday by MeasureOne.

NAFCU Chief Economist and Director of Research Curt Long noted that as of September, year-over-year private student loan growth at credit unions was 21.9 percent and loan balances are up to $3.1 billion. According data from the Federal Reserve, Long said, outstanding loans totaled $1.3 trillion as of September and the credit union share of that was about 0.2 percent.