In two separate stories released earlier this month, massive student loan debt promising to hamper the lives of recent college graduates is more troubling than thought, with even officials in charge of the debt not knowing the full extent of the issue.
A report from Mother Jones, a left leaning political magazine, highlighted a dispute that is quickly becoming public, between Massachusetts Democratic Sen. Elizabeth Warren and the White House. Warren has called out the Department of Education for not doing enough for graduates struggling to pay off massive education loans.
But while that debate is firing up, a story from the Huffington Post alleges that even the Federal Government is not sure how big the problem is — with debt estimates ranging from $708 billion to $1.32 trillion.
Both stories create a picture of a more severe problem in what many are calling a national crisis.
During her tenure Warren has brought to light student debt problems that may be creating an unstable financial situation for many college graduates, with nearly 43 percent of borrowers claiming high debt loads are creating very difficult and creating financial distress according to one survey.
While poor accounting practices and a lack of oversight in tracking student loan debt figures may not directly impact borrowers, it is making it difficult for any measures that may alleviate the situation to emerge.
In a letter from Warren to U.S. Secretary of Education, Arne Duncan, Warren claims that the federal government is unfairly profiting from student loan debt, and in so is failing to understand the full impact on borrowers.
“The Congressional Budget Office’s most recent baseline indicates that the federal government is still expected to produce $110 billion in profits from its student loans over the next decade,” Warren said in the letter. “Congress did not create federal student loans to generate revenue for the federal government — to the contrary, it gave the Department of Education a host of tools to ensure that federal student loan borrowers are treated fairly and with dignity. For that reason, we write to ask the Department of Education to commit to reducing student loan profits by fulfilling its existing responsibilities under the law to help student loan borrowers manage their debts.”
The letter claims that at least 25 percent of the 40 million Americans with student loan debt are in deferment, forbearance, or default. She also claims that legislation that was enacted to alleviate the problem is not being utilized, instead the government is purposefully maintaining the status quo, to ensure debt revenues continue filling government coffers.
“It is not the job of the Department of Education to maximize profits for the government at the cost of squeezing students who are struggling to get an education,” Warren said.
In the letter she instead calls for the Department of Education to use the authority granted by Congress to “ensure that our most vulnerable young people struggling with the burden of federal student debt have meaningful opportunity to build a strong future for themselves and their families.”
At the same time the Department of Education is hampering debt relief by failing to track student loan figures, on an alarming scale, according to the Huffington Post story.
William Dudley, president of the New York Fed, led meeting to analyze the full problem. Attendees have claimed the scheduled representative from the Department of Education, failed to show, and have stated afterward that despite the government guaranteeing almost 90 percent of student loans, the department does not have accurate data or is unwilling to share that data with policy makers.