In February, the Federal Reserve released data showing that Americans were taking on increased levels of debt at a rapid pace. The data showed that Americans had taken on new debt by seven percent more than the previous year. Yet, concealed among all those numbers is a significant statistic that shows that the federal government holds about $876.1 billion in student loan debt as of February 2015.
This figure represents the highest ever volume of student loan debt held by the US government. But, another report also shows that members of Congress can no longer treat the student loan crisis as something that doesn’t affect them. The new class of Congress has 46 members who owe thousands of dollars in student loan debt. Significantly, no members of Congress had outstanding student loans in 2014.
The Underlying Causes Behind the Record Levels of Student Loan Debt Held by the US Government
In his report on the subject, Melvin Backman highlights the graphical representation of data published by the Federal Reserve. A look at the graph on the number of outstanding federal student loans shows a spike in the volume of federal student loans dating back to 2009-10. Backman writes that this spike indicates two events.
The first event concerns the government’s decision to become the sole lender to students. Previously, students used to take student loans from banks or from the federal government. In lieu of administering college loans to students, private banks received federal subsidies for providing student loans. The federal government’s decision to become the sole lender to students meant that private banks would handle federally backed student loans no longer. This overhaul eliminated the fees that banks typically received for acting as intermediaries, thereby saving the government billions of dollars.
The second event concerned the reaction of the average American to the recession. As more and more individuals received layoff notices in the aftermath of the recession, job security continued to dip. To deal with this, people realized that they needed to acquire new skills for adding more strings to their bows. As a result, several people began returning to school during this period.
Both these events have resulted in another record for the federal government. According to the Federal Reserve, the federal student loan portion of all non-revolving consumer credit stands at 35.5 percent as of February 2015. The default rates on federal student loans stands at approximately 14 percent. However, this number includes the number of defaults in for-profit schools as well. Typically, a greater than average percentage of students end up in taking out higher than average student loan amounts to pay for college.
Student Loan Debt No Longer a Problem Confined to the Average American
News reports often mention that each successive class ends up taking on higher amounts of student loan debt than the preceding one. Many people will agree that it is taking progressively longer for borrowers to repay their student loan debts. In some instances, even citizens nearing (or into) their retirement years need to work for repaying their student loans. In this scenario, it appears that members of Congress no longer remain exempt from the ever-widening reach of student loan debt.
Tyler Kingkade writes that the Center for Responsive Politics conducted an analysis of financial disclosure forms for 2011. Their analysis reveals that 22 Democrats and 24 Republicans collectively owe a figure ranging from $1.8 million to $4.3 million on their student loans. Because members of Congress need to report their debts in ranges, the exact amount is unknown.
In the summer of 2012, Sen. Marco Rubio (R-Fla) made headlines when he revealed that he had not repaid his student loan dating back to his days in law school. He has since, repaid his debt thanks to book sales. However, this candid admission surprised many people because several members of Congress are millionaires. This fact often makes the middle-class believe that legislators don’t get their struggles on everyday affairs such as the ever-increasing cost of college.
Members of Congress Repaying Student Loans Part of Key Education Committees
Kingkade also mentions that many of the members of Congress with outstanding student loans are part of key education committees. For instance, four members of the House subcommittee on higher education are also repaying their student loans at present. All four individuals are Republican members of Congress.
In addition, Sens. Chris Murphy (D-Conn) and Elizabeth Warren (D-Mass) are members of the Senate Health, Education, Labor and Pensions Committee. However, they were also repaying their student loans. However, in the case of Sen. Elizabeth Warren, she was repaying a student loan from Harvard for one of her children. According to one of her staff members, she has since repaid this loan.
The Top 10 Members of Congress with the Most Student Loan Debt
At this stage, it is worth highlighting that the data analyzed by the Center for Responsive Politics analyzed data from the disclosure forms for 2011 – the most recent year available. Therefore, it is quite likely that some of the individuals with outstanding student loans might have repaid their debts since that time. However, the top 10 members of Congress with the most student debt include:
- Rep. Raul Ruiz (D-Calif) with an outstanding amount ranging from $115,002 to $300,000
- Rep. John Carter (R-Texas) with an outstanding amount ranging from $100,001 to $250,000
- Rep. James Bridenstine (R-Okla) with an outstanding amount ranging from $100,001 to $250,000
- Rep. Grace Meng (R-Texas) with an outstanding amount ranging from $100,001 to $250,000
- Rep. Tom Rooney (R-Fla) with an outstanding amount ranging from $100,001 to $250,000
- Rep. Kevin Yoder (R-Kan) with an outstanding amount ranging from $80,003 to $200,000
- Rep. Louis B Gohmert Jr (R-Texas) with an outstanding amount ranging from $70,001 to $130,000
- Hon. Pedro Pierluisi (D-Puerto Rico) with an outstanding amount ranging from $65,002 to $150,000
- Rep. Tom McClintock (R-Calif) with an outstanding amount ranging from $60,001 to $115,000
- Rep. Gerry Connolly (D-Va) with an outstanding amount ranging from $55,003 to $165,000
Another point worth highlighting here is that these loans include loans taken by the individuals for themselves, their spouses or their children.
Members of Congress with Student Loans to Repay a Good Sign?
In 2009, Catherine Rampell reported that in 2008, about two-thirds of US senators were millionaires. The Center for Responsive Politics had conducted an analysis of politicians’ fortunes based on the required annual financial disclosures submitted by the lawmakers in 2008.
The analysis concluded that about 68 legislators had a worth of at least $1 million. Of these, Herb Kohl (D-Wis) was worth an estimated $214,570,011 in 2008. The average net worth across the Senate was $13,989,022.98.
Similarly, the analysis revealed that about 240 legislators in the House were worth at least $1 million, of which Darrell Issa (R-Calif) was worth an estimated $251,025,020 in 2008. The average net worth across the House was $4,670,831.
The average American often feels that the policymakers are too far away from ground realities when they formulate laws that govern American citizens. Given this backdrop, the increasing trend of members of Congress with student loan debt might be a good sign.
For instance, when quizzed about her views on student loans in a recent interview, Sen. Elizabeth Warren said, “The interest on student loans is set so that after you account for the bad debt losses, the administrative costs, the cost of the funds… It’s set to produce tens for billions of dollars in profit for the U.S. government. Just from 2007 to 2012, it’s on target to produce 66 billion in profit. The government should not be making profits off of kids trying to get an education.”
Although it’s still early days, if this trend of members of Congress with outstanding student loans continues to increase, the chances are that eventually, a group of individuals will be able to devise plans for countering the student loan crisis. Being acquainted with the travails of the existing student loan system will be immensely useful in helping these individuals to come up with practical ways for dealing with the student loan crisis before the bubble bursts.