It has been years that the student loan debt issue is one of the most arguable points in the United States. Apart from its massive impact on new graduates, these debts are also a substantial economic burden for the United States government. Having a lot of student debts on the economic sphere can sometimes create several tackles for financial issues. Most students have a significant burden after graduation because of those debts, and most of them yet do not know how to handle it and repay it. JPMorgan, the U.S. based multinational investment bank, CEO Jamie Dimon has also addressed various opinions about student loan debt, and we will cover the article with his views on this issue.
There are lots of opinions, pieces of advice and other things about it, but it seems that it is like a dead-end topic to discuss a lot without any conclusion. So no doubt that from bank CEOs, loan services to the government officials this topic has been discussed various times and still there is no strict regulation on it as well.
Debt is a problem for Americans
Jamie Dimon thinks that Americans only have one problem which is mostly considered as student debts. He underlines that the largest consuming population is in a great form in the country right now, but there is a problem that ruins this forms a bit which is student debt loan. Back in 2016, Jamie Dimon attended in the Grant’s Interest Rate Observer Conference, which took place in New York City, and during the conference he seemed very optimistic about the whole situation of debt payments by people in the U.S. He was addressing that people are paying their debts in a very steady format such as their mortgages, auto loans, and domiciliary. And of course, those were mentioned without underlining student loan debt issue.
The reason he dragged this issue from others is to know that this debt problem is a huge one and the more problematic one rather than other debts which are being paid steady. There was addressing the student debts as a problematic one and strengthening his opinion by pointing out that this issue is increasing rapidly. He also mentioned that when Congress passed the maintenance issue on federal students debts, banks became out of this issue in 2010.
According to the recent data from the Department of Education, there are approximately 22 million student debt holders in the country, and 40% of them do not pay their debts back within the time. And the absence of some of them pushes this issue to a critical situation. To sum up, he also mentioned that this student debt issue is turning into bad and believed that something is going wrong.
Something is wrong
Back in 2017, JPMorgan CEO Jamie Dimon released his annual letter which is published frequently to address some issue in the United States. Student loan aside, Jamie Dimon criticized public policy system in the United States because he underlined that some non-economic areas could be a barrier for economic growth. What are those? It comes first crime and housing regulations. That is why he insistently mentioned that something is wrong here.
Apart from those factors, there is one issue that he repeatedly said in this letter more than 30 times. This issue is an educational system. He was pointing out that schools such as vocational, higher and other types of educational centers do not provide a comprehensive education for students and as a result of the weak education system of those schools, students are not prepared and educated well for work life. Another point was government lending in this letter.
Jamie Dimon mentioned that government lending remarkably increased from $200 billion to $900 billion since 2010 and people are not happy with that because they are not able to get other credits. So he believes that Americans are right to be angry at officials because they do not have any other alternative to handle this situation, so they want us to do our work well for them.
Student debt is a significant issue
Recently, JPMorgan CEO Jamie Dimon noted that student loan is a significant issue at this time. He included some business issues of JPMorgan and other things such as student loans in his annual letter. In the annual letter, Jamie Dimon stressed that student debts, rising of costs of schools or colleges are going to be a significant issue. As he mentioned mortgage and household issues in the past, now again he addressed that those issues are influenced by student debt loan because subsequent homeowner rates are affected, for instance, if there is $1000 debt growth decrease 1.8% rate of homeownership.
He believes that according to the statistics, student debt starts being a trouble for the economy. As a result of statistics, there are 44 million borrowers, and they have 1.5 trillion student debt. It is now appealing that student loan debt is more than credit cards along with auto loans which makes this debt the second highest one in the U.S. The first one is mortgage debt. JPMorgan CEO Jamie Dimon introduces four main factors that can help lighten student loan debt. He believes that those ideas can provide a proper environment for student debts in the first place. What are they, then?
First thing first, he points out that they have some programs that can relieve borrowers about their debts. These can help lighten the burden of a former student which caused by the debts. Right now, there are plenty of programs that help people who have debts for the repaying process. Those are Refinance Student Loans, Income-Driven Repayment, Direct Loan Consolidation, Student Loan Forgiveness.
Donald Trump, the president of the United States, also introduces the new kind of programs such as new student loan discharge program which is more simplified and has simple repayment process and earlier loan forgiveness for students who are undergraduates. Jamie Dimon also proposes that the government should reveal all student loan debts as if they are doing towards the banks. In this way, the federal government can also be accountable for the lending process. He also mentions that there is a 500% increase in direct government lending in the last decade.
Before the Obama administration, federal student loans could be operated by banks and financial institutions. However, in today’s process, the federal government are responsible for issuing federal student loans. Furthermore, Jamie Dimon is a proponent of well-designed underwriting standards of student loan creation, and he underlines that they need to get proper advice to manage it.
Any 2019 recession due to debts?
So as well as financial officials, people are also worried about economic problems because debts are the significant issue for the government’s financial system and people know that the debts can bring recession or any problem in the economy like back in 2008 or other historical events. However, it is obvious that most of the debts are not paying back and it is getting overload gradually every year, so people are familiar with this issue and expect that officials give statements about the future.
After underlining debts issue and having troublesome opinions about that, Jamie Dimon is optimistic about those problems in 2019 as well. He believes that those debts will not be a big deal in 2019 and it will not bring any recession to the economy this year. He also mentioned that yes there is no doubt that debts in the United States are increasing very fast, but this growth is not at the menace step. For the whole debt issues such as mortgages, student debts, and others, he believes that those are not spreading danger right now, and they can handle them at this level because there is not any threat to the financial system. He also mentioned that today was not the same back in 2008, and we do not expect any recession or financial problems due to student loan debt in 2019.