by Libby A. Nelson
Federal student loan debt has topped $1 trillion, the Consumer Financial Protection Bureau will announce Wednesday, a milestone that will only intensify the debate in Congress over what to do about student loan interest rates.
The interest rate on new, federally subsidized Stafford loans doubled on July 1 to 6.8 percent thanks to congressional inaction, and the two parties haven’t been able to agree to a solution to lower the rate.
“I think there’s been a lot of attention about future student loan interest rates but student loan debt continues to grow,” said Rohit Chopra, the CFPB’s student loan ombudsman. The growing debt suggests that lawmakers should pay attention to issues beyond interest rates for a small slice of student loans overall, Chopra said.
The vast majority of new and outstanding student loans in the U.S. are backed and issued by the federal government, either via banks like Sallie Mae or, since 2010, directly through the Education Department. All student loan debt, which includes private loans from banks as well as the federal loans, now stands at $1.2 trillion.
Total outstanding student debt, when you add federal and private loans, passed $1 trillion near the end of 2011, according to the CFPB. When that number was made public in May 2012, it kicked off a wave of public concern about rising student debt levels. Now that federal loans alone have topped $1 trillion, it may accelerate discussions over what to do about interest rates.
Student loan debt already on the books won’t be affected by the interest rate increase — it will apply only to loans issued after July 1, but the eye-catching $1 trillion number is likely to be used as fodder by lawmakers and groups who argue that students are already taking on too much debt to attend college.
“$1.2 trillion is just too much. Our leaders in Washington must come together to tackle the problem of college affordability and unmanageable student loan debt,” Jen Mishory, deputy director of Young Invincibles, a group that represents Americans under 35, said in a statement. “We need to take action on the federal interest rate increase right now, but there is a crisis-level problem to fix beyond that.”