WASHINGTON, DC – The US government has hired the consulting firm McKinsey to evaluate the federal student loan portfolio in order to deal with the potential losses on student debt. It has decided to sell some portion of the debt to private investors to get rid of potential losses due to student debt. There is a huge increment in the federal student loan, which is set to near $1.5 trillion due to a rise in the prices of college. The weight of outstanding student loan has risen over credit card and mortgage debt which raises questions over the ability of the Department of Education to handle the federal student loan portfolio.
The government doesn’t take into consideration the potential income of a student while lending to them. In comparison to credit card and mortgage debt, only the reputation of a college is taken into consideration while giving student loan. That is why about 11% of borrowers who entered to repay loans in 2015 failed to do so within three years. After the decision of the government to create new repayment plans for struggling borrowers, the lending program cost increased to a great extent. Under this new repayment program, people are allowed to tie monthly payments to their incomes and they need to make 20 years of payments to get rid of the remaining debt.
Applying for student loan has become so much easy as there are many online platforms such as Finansis that help in this case. Democrats are looking for ways to boost the growth in the student loan sector. Also, there are plans to forgive $50,000 of student loans for Americans who earn less than $1,00,000 a year. McKinsey study would suggest the ways to tackle the growing student loan debt.