Jamie Dimon really doesn't like how the US is handling student loan debt
JPMorgan CEO Jamie Dimon is an outspoken critic of the student loan crisis, and how the situation could impact the U.S. economy.
Last week, he told Yahoo Finance that student lending in the U.S. has been “a disgrace.” He also said the U.S. government has “irresponsibly” lent borrowers more than $1 trillion since 2010.
Outstanding student loan debt surpassed $1.5 trillion in 2018, second only to mortgage debt.
Here’s a look at some of the other comments the outspoken CEO has made on the topic:
Student debt and the next recession
In January, Dimon said the big area at risk if the U.S. enters a recession is student loans, which he cited as having a “lack of discipline.”
Student loan debt is largely owned by the government and not the banking sector.
“The lender will not be there, so a lot of these borrowers are going to be stranded,” he said. “It won’t be anything like you saw the last time for the large banks.”
A “significant issue”
In his annual letter to shareholders, Dimon said “irrational student lending, soaring college costs and the burden of student loans have become a significant issue.”
He also mentioned that these debts are impacting people’s ability to obtain a mortgage, as well as starting to have effects on the overall U.S. economy.
A government problem
In a similar vein to his comments on student loan debt being an at-risk area if the U.S. enters another recession, Dimon said the government needs to adhere to stricter lending standards.
“We would be well-advised to have more properly designed underwriting standards around the creation of student loans,” he wrote to shareholders. “Direct government lending to students has grown almost 500 percent over the last 10 years — and it has not all been responsible lending.”
Effects on homeownership
Also in his annual letter to shareholders, Dimon noted that a $1,000 increase in student debt reduces subsequent homeownership rates by 1.8 percent.
Research from the Federal Reserve Board Division of Research & Statistics came to a similar conclusion. The homeownership rate among young Americans fell nine percentage points between 2005 and 2014—and rising student debt accounted for about one-fifth of the overall decline during that time period, researchers found.
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Loan forgiveness
Massachusetts Democratic Sen. Elizabeth Warren and Independent Vermont Sen. Bernie Sanders – who are both 2020 presidential hopefuls – have recently released plans to forgive borrowers of their student loan debt. Both have said the proposals could be paid for through new taxes.
In regards to potential forgiveness plans, Dimon told Yahoo Finance that the government should look at the problem comprehensively.
“Fix the broken parts and then forgive those people [that] need forgiveness, and then help people get into school, and then make sure the schools are responsible for getting the kids out,” he said.