Changes in student lending and rising tuition fuel an increase in consumer debt

Americans have borrowed from banks, finance companies, and credit unions for years, but lately the percentage of consumer debt owed to one source—Washington—has surged. That’s because of a change in the federal law governing student loans.

The 2010 revision reduced the role of private providers in student loans by eliminating federal subsidies and guarantees. The U.S. Department of Education expanded its direct loan program, prompting a rise in the volume of lending.

Student loans are the only type of consumer loans made by the federal government. Much of the borrowed money has gone to cover rising tuition costs. Consumer debt has ballooned to almost 20 percent of gross domestic product.