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Student Debt: What the Fed Report Misses

A Federal Reserve report released Tuesday shows Americans are on the hook for $471 billion in federal student loans. If only the true number were that small.

As college tuition continues to rise, students and their parents have been signing up for federal student loans at a rapid pace. By the end of September, borrowers are expected to owe a whopping $840.5 billion in federal student loans, according to an analysis of federal budget data by That’s up 10% from a year prior. Tack on capitalizing interest—most borrowers don’t start paying back these loans right away and in most cases interest continues to accrue—and the figure balloons even higher.

Why the discrepancy between the two reports? The Fed’s report includes just the federal loans that have been distributed by the Department of Education. But before July 2010, banks and other private lenders were providing federal student loans to borrowers as well—of which there’s still about $346 billion that borrowers are still paying back. A provision in President Obama’s health care law ended this program, making the federal government the only distributor of federal student loans.

Student-loan debt isn’t just growing—it’s following borrowers later into life and wrecking havoc on their retirement. As we reported today, the federal government is increasingly docking Social Security benefits for retirees who’ve fallen behind on their student loans. There have been roughly 115,000 cases so far this year, up from just six in 2000, according to the Treasury Department.

Experts say the trend will likely intensify. Sixty-six percent of the Class of 2012 graduated this spring with debt, and their student loans averaged $28,720, up from $9,320 in 1993, according to


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    • Rulers of this world (aka bankers) want you to borrow money that they create out of nothing and they want you to pay them interest for a lifetime, essentially making you a slave your entire life. Google for WEB OF DEBT KONDRATIEFF WAVE to understand why this system is not ideal for the average person.

    • How about putting some rules and limits on the colleges to reduce costs for a change? They just raise tuition every year at rates that have far exceeded that of inflation, on the backs of students and parents, so that they can maintain their bloated salaries, benefits, pensions, and world-class facilities, athletic programs, etc. They keep building their empires with layer upon layer of administration…deans, assistant deans, chancellors, provosts, department heads, etc. all with their staffs and exorbitant resource consumption. I have worked with and known many University personnel over the years in my private sector job and have seen them retire at 55 with close to 100% of their income or more and the finest health care and other benefits provided for the rest of their life. It’s time we took a close look at the excessive compensation and benefits within the Universities as a place to cut fat and rein in automatic excessive tuition hikes and college costs. Sickening.

    • Kate with that line of reasoning why pay any debt off you accumulate over a lifetime. Grow up you are entitled to walk away from debt you incur period.

    • It is criminal to dock Social Security benefits for student loan payments!! If a person is retired, it’s over! The chance to recover that money borrowed is gone. Get over it America! It’s already bad enough you can’t discharge student loans in bankruptcy.

    • i agree with many of the readers points however every parent and every student need to understand the risk of borrowing so much money with very little job guarantees. The students have to realize times have changed and they need to be more creative and have more flexibility with their educational needs. The student loan debt crisis will only get worse so make intelligent financial decisions for the future.

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