Student-loan debt threatens recovery

Associated Press

WASHINGTON

The federal student loan program seemed like a great idea back in 1965: Borrow to go to college now, pay it back later when you have a job.

But many borrowers these days are close to flunking out, tripped up by painful real-life lessons in math and economics.

Surging above $1 trillion, U.S. student loan debt has surpassed credit-card and auto-loan debt. This debt explosion jeopardizes the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new economic crisis.

With a still-wobbly jobs market, these loans are increasingly hard to pay off. Unable to find work, many students have returned to school, further driving up their indebtedness.

Average student-loan debt recently topped $25,000, up 25 percent in 10 years. And the mushrooming debt has direct implications for taxpayers, since 8 in 10 of these loans are government-issued or guaranteed.

President Barack Obama has offered a raft of proposals aimed at fine- tuning the system and making repayments easier. Yet the predicament of debt- burdened former students has failed to generate much notice in the GOP presidential campaign. Instead, the candidates are dismissive of government student- loan programs in general and Obama’s proposals in particular.