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Ben Bernanke thinks student loan debt is not a problem

Aug 8, 2012

With student loan debt sitting at approximately $1 trillion, Federal Reserve Chairmen Ben Bernanke, an adult know-it-all of sorts, thinks it poses no threat to financial stability.

“I don’t think it’s a financial stability issue to the same extent that, say, mortgage debt was in the last crisis because most of it is held not by financial institutions but by the federal government,” Bernanke said yesterday at a town hall meeting with teachers at the Fed in Washington.

Perhaps Bernanke can be excused of sugarcoating reality for his audience of teachers. The point remains, however, that student loan debt, at $1 trillion, is a very real problem. With the economy still in the doldrums, and American universities still pumping out graduates into a virtually non-existent job market, the debt total is only going to go up. It’s difficult to pay of student loans when one is unemployed or underemployed, and even more difficult to contribute to an economic recovery.

Student loan debt probably will not cause the damage of, say, the sub-prime mortgage and credit default swap fiasco, but it cannot be good for the long-term economic health of the country. That the federal government guarantees the debt is irrelevant: it still needs to be repaid. Students saddled with lots of debt and no job can’t spend much money to kickstart the economy, and neither can parents who are taking over the loan repayments. Indeed, those families whose debt contributes to that $1 trillion figure won’t be contributing to the economic recovery any time soon.

Bernanke needs his fuckin’ head examined.

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