Student Loans Are A Drag On The Economy And Society

Chris Herbert, research director at Harvard Universitys Joint Center for Housing Studies, agrees with those who say the swelling student debt is a concern. But he also says it may not hobble young adults access to the housing market as much as some fear. In his own analysis, Herbert found that student loan debt is not all piled upon recent college graduates. Rather, it is evenly distributed among age groups as of 2010. Also, the median amount borrowed for school by people in their 20s barely budged from 2004 to 2010, hovering around $11,000 when adjusted for inflation, Herbert said. Only a small share of the under-30 crowd is borrowing sizable sums, he said.

She didnt notice as quickly this time but went online to pay the loan late. Document Everything Next, Boehm found out her loan went into forbearance , pushing her next payment to February. This was in December, and at this point she had started printing every bit of information that popped up when trying to manage her loan. Even while payments are suspended due to forbearance, the loan accrues interest, and Boehm saw her monthly payment jump $50. About $300 in capitalized interest was added to her balance because of the forbearance (meaning she would then have to pay interest on that interest), but Boehm said it just didnt make sense.

Yet there’s a nightmare now facing graduates and even those who drop out. A mountain of student loans they can’t pay off. It’s estimated the average student loan in America is just under $30,000. There’s more than $1 trillion of outstanding student loan debt. Even with that reality, First Lady Michelle Obama is leading a media blitz encouraging students to apply for financial aid. Economists say student loans are now the 2nd largest debt in the average household behind mortgages.

The consequences not only include weaker home sales, but less spending on all kinds of consumer goods and services. Slack demand, in turn, gives businesses less reason to hire and create more jobs. And if graduates are unable to find a well-paying job, the burden of paying back the debt grows even more onerous. Unlike other forms of debt, student loans are almost impossible to reduce or eliminate through bankruptcy unless an individual can prove extreme hardship.Many people take years, sometimes even decades, to pay all the debt off. It can even hurt their ability to save for retirement.

Ms. Wiersch wrote in a report on rising student loan debt two weeks ago that the burden could prevent recent college graduates with an entrepreneurial spirit from starting a business or expanding one. Student debt can limit small business owners ability to qualify for loans, preventing growth and payroll expansion. Doctors may avoid low-paying but much needed specialities, such as caring for elderly or for children. Talented teachers may leave their professions in search of higher-paying careers to offset the impact of student loan payments on their personal finances. The Block News Alliance consists of The Blade and the Pittsburgh Post-Gazette.

Since 2008 the peak level of household debt households lowered their levels every type of debt except student loan debt. Student loans have continued to grow throughout this process of deleveraging. That orange line is student debt. It is going in the opposite direction of all of the other lines. But arent people facing poor job prospects just taking out more loans to avoid working as baristas at coffee shops that drip the coffee super slowly for no apparent reason? This does not appear to be the case from the debt data.


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