JPMorgan Chase Chief Executive Jamie Dimon blamed student loan defaults on the Federal government. Stating in his annual letter to shareholders earlier this week that since the government took over student loan lending in 2010, the amount of direct government lending has increased from $200 billion to $900 billion, creating what he says is “dramatically increased student defaults” and a population of student loan borrowers that are angry about the size of their student debt.
In the letter, Dimon said that the outsized student loan debt hurts borrowers’ ability to get credit, which has an impact on the rest of the economy. “Education is leaving too many behind,” wrote Dimon. “Many high schools and vocational schools do not provide the education our students need – the goal should be to graduate and get a decent job. We should be ringing the national alarm bell that inner city schools are failing our children – often minorities and children from lower income households.”
According to Dimon, less than 60 percent of students from inner city schools graduate and many of those that do complete high school aren’t prepared for a job. As a result, the leader of one of the nation’s largest banks said the U.S. is creating “generations of citizens who will never have a chance in this land of dreams and opportunity.” Dimon also seems to take issue with President Trump’s immigration policies, saying in the letter that it is “alarming” that about 40 percent or roughly 300,000 students who receive advanced degrees in science, technology, engineering and math each year at U.S. colleges and universities are foreign nationals who have no legal way to remain in the country even though they want to. “We are forcing great talent overseas by not allowing these young people to build their dreams here,” he said.
Dimon’s comments on the state of student debt comes at a time when the nation collectively owes more than $1.4 trillion in student loans. Around 44 million people have at least one loan with the average amount owed standing at around $28,000. The current default rate stands at 11.3 percent, which is an improvement from last year. While Dimon sounded a concerned tone in his letter to shareholders, his intentions aren’t purely altruistic. After all, JPMorgan makes money by lending money to consumers, whether that’s to purchase a home, buy a car or start a business. But student loan debt is preventing a lot of millennials from doing all of those things, which means less profits for JPMorgan Chase.
“The banking industry is right to be worried about heavy debt burdens of young consumers,” said Rohit Chopra, a senior fellow at the Consumer Federation of America, in an interview with CNBC looking at Dimon’s comments. “But the answer is not hand the keys back to Wall Street. We tried that before and it failed miserably.”
Author: Dave Rathmanner
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