Taxpayer on the hook

A trillion in student debt may come home to roost if we get a sudden rise  in unemployment.  We could see a short term rise, yet again, in deficit. This debt is scary, about 5% of gdp.

Powell says student debt has long-term negative effects 

In his comments, Powell noted there’s little he can do as a monetary policy maker to change these policies, but that Congress could take a look. “This is fiscal policy, this is something for you, not something for the Fed,” he said, adding that in looking at the research, “you do start to see longer term negative effects on people who can’t pay off their student loans,” he said. “It hurts their credit rating, it impacts the entire path of their economic life.”

Powell isn’t the first monetary policy maker to express concern about rising student debt. New York Fed chair William Dudley regularly discusses the impact of student debt on economic mobility and former Fed chair Janet Yellen said it had escalated to an “extraordinary degree.”When pressed by Schatz about whether student loans were a macro economic risk, Powell cautioned that it may pose a risk in the future, as student debt continues to grow. “It absolutely could hold back growth.”