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Report Details Woes of Student Loan Debt - As in the housing market, securitization of student loans led to more aggressive underwriting for borrowers who could not possibly afford the debt they took on, according to a government report.


The 131-page report was formally released by the Education Department and the Consumer Financial Protection Bureau on Friday. It provides new estimates for total outstanding student loan debt: more than $1 trillion in 2012, composed of $864 billion in federal government loans and $150 billion in private student loan debt.

Cumulative defaults on private student loans exceeded $8 billion, a sum from over 850,000 distinct loans.
That total has risen in the last decade as lenders bypassed college financial aid offices and marketed loans directly to students. Students often signed on without realizing the difference between private and government loans or that government loans usually offered better terms, the report says.
Private student loans, for example, usually charge higher interest rates and are harder to discharge in bankruptcy.