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New York Fed: Student loan debt to rise in coming years

Mar 14, 2012 Mike Garretson

Student loan debt continues to skyrocket, and some analysts are warning that the trend soon get out of hand and provide the basis for a financial collapse akin to the 2008 housing bubble. According to the New York Federal Reserve, the outstanding student loan balance in the U.S. stands at $870 billion, considerably higher than the total volume of credit card ($693 billion) and auto debts ($730 billion). Enrollment volumes and the cost of education are both rising, meaning the debt balance is likely to rise. President Barack Obama recently capped monthly federal student loan repayment at 10 percent of discretionary income for college graduates, however, state budget cuts to higher education and generally tight fiscal circumstances may leader to higher average tuition costs. "Moreover, student loan debts are typically shouldered by recent college graduates and other young workers, who tend to face lower incomes and higher rates of unemployment than older cohorts," the New York Fed reported in a statement. One would think that with such high debt volumes, collection and recovery activity would be rampant. But as public debate turns to the issue of consumer debt, regulation of the industry tends to rise. This underscores the important of consumer credit risk management.