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Steve Chiotakis: Protests over the inequity between Wall Street and the rest of us continue. Some of the cardboard signs held up during weekend protests in New York read: “Honk if you have student debt.” The protests have also fueled an online petition that proposes to forgive all student loan debt to boost the economy.
Marketplace’s Gregory Warner is with us live to talk about what the protesters are so upset about. Good morning, Gregory.
Gregory Warner: Good morning.
Chiotakis: Why has student loan debt become this cry of protestors — is it just because they’re mostly young people here?
Warner: That’s part of it, sure, but student loan debt in this country is now $830 billion. That’s higher than credit card debt, and of course there are more credit card holders than students — so that’s a huge debt burden. And students are taking on more of the riskiest kind of debt — these unregulated private student loans — where you have the least protection and pay the highest interest rates, up to 19 percent.
So the argument you hear is, “You’ve bailed out Wall Street, what about us?” Forgive student loans, you boost the economy because you put hundreds of dollars a month back in the pocket of middle-class families, and of young people just as they’re entering the workforce.
Chiotakis: What does this have to do with Wall Street?
Warner: Just as Wall Street helped spur the housing bubble with mortgage-backed securities, they’ve also spurred the student loan bubble with, as they’re called, student loan asset-backed securities.
So, that Wall Street capital has encouraged really aggressive marketing by high-interest private loans to students, and now, student loan defaults jumped 26 percent last year. And just as foreclosed homes drag the economy and limit people’s choices, so do private student loans — which I learned you can’t even get rid of by declaring bankruptcy.
Chiotakis: Marketplace’s Gregory Warner, reporting for us this morning. Gregory, thanks.
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