Calhoun’s the president of the nonprofit Center for Responsible Lending. For decades he’s been keeping watch to protect people from reckless lending. He says that with student loans, just like with the housing crisis, there’s no consideration about whether the person getting the loan will be able to repay it.
“Once again, it’s the mismatch between the debt and the borrower’s income, their ability to repay,” Calhoun says. This time around it’s the government making the vast majority of the loans. That’s effectively turned the Department of Education into the country’s largest consumer lender.
And, Calhoun says, more and more people can’t pay. “Already in the student loan world, we are seeing default levels that approach what there was in the subprime mortgage world,” he says.
Calhoun pulls up a slide on his computer monitor to show another parallel —minority groups were hit hardest by the subprime mortgage mess.
“And we’re seeing it again in student loans. As we sit here and talk today, over a fifth of black college graduates are in default on their student loans.” Calhoun cites “the amount of debt they took on and the fact that they typically still earn less in the job market.”