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Obama administration flags big growth in student debt

BALTIMORE, April 29 (Reuters) - The Obama administration on Tuesday flagged the "daunting" levels of debt taken on to pay for college education in the United States, and pledged to take a closer look at the sustainability of that borrowing.

"We need to look carefully at the performance of these loans," Deputy Treasury Secretary Sarah Bloom Raskin said in a speech at the University of Maryland, Baltimore County.

Raskin's comments played to growing worries among economists and investors over the more than $1 trillion in outstanding U.S. student loans, most of which was lent by the federal government.

She pointed to data showing a university education can help people rise up the income ladder, a key element of the administration's focus on reducing economic inequality.

But she also noted that the percentage of university graduates with student debt had risen to 60 percent in 2012, twice its level two decades earlier.

By the end of last year, more than 40 million people owed money for their college educations, and an increasing share of people are falling behind on their loans, Raskin said.

"These numbers are daunting," she said, saying the U.S. Treasury needs to be "clear-headed when we evaluate the sustainability of these debt levels and the challenges associated with repayment.

It was Raskin's first policy speech since joining the Treasury last month. As the No. 2 official at the Treasury Department, she is expected to play a central role in coordinating the government's efforts to avoid future financial crises.

Raskin called for policies that would help people make more informed decisions about where to go and how to pay for school, noting that higher shares of students took on loans to pay for private colleges than for public colleges.

She also said default rates were higher for students at for-profit schools, but that better data was needed to understand the patterns that lead to default.

(Reporting by Jason Lange; Editing by Chizu Nomiyama)