JPMorgan CEO, Jamie Dimon made a statement to Yahoo Finance about the student loan stating that the U.S. government has lent more than $1 trillion from the past 9 years.
Outstanding student loan debt exceeded $ 1.5 trillion in 2018.
In January, Dimon said the large area at risk. If the U.S. will enter a recession. As student loan is owned just by the government.
He said that many of these borrowers will be stranded if the lender will not be there.
He also said that high college costs and the burden of student loans have become a big problem.
He also stated that such debts are affecting people’s ability to obtain mortgage.
A problem of government
Similar to your comments that student loan debt is an area of risk if the US. They enter another recession; Dimon said that the government needs to adhere to stricter credit standards.
“We are advised that we have better insurance standards designed for the creation of student loans,” he wrote to shareholders. “Direct government student loans have grown almost 500 per cent in the last 10 years, and not all of them have been responsible loans.”
Effects on homeownership
Dimon noted about $ 1,000 increase in student debt reduces subsequent homeownership rates by 1.8 per cent, in his annual letter to shareholders
Research from the Research and Statistics Division of the Federal Reserve Board came to a similar conclusion. The researchers found that the rate of homeownership among young Americans fell by nine percentage points between 2005 and 2014, and the increase in student debt accounted for about a fifth of the overall decline during that period.
Massachusetts Democratic Senator Elizabeth Warren and Vermont Independent Senator Bernie Sanders recently launched plans to forgive borrowers of their student loan debt. Both have said that the proposals could be paid through new taxes.
Dimon said to Yahoo Finance that the government should analyze the problem comprehensively.