Tags: student | loan | debt | economy

USA Today: Increasing Student Loan Debt Having a 'Ripple Effect' on Economy

Thursday, 18 Jul 2013 01:13 PM

By Jim Meyers

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Student loan debt may be weighing heavily on the minds and budgets of former college students, but it is also having a broad impact on America's overall economy.

Two-thirds of those who graduated from college in 2011 graduated with an average student loan debt of $26,600, according to the Project on Student Debt. In 1993, less than half of students graduated with debt, and those who did owed an average of $9,350.

Yet recent graduates are suffering an unemployment rate of more than 13 percent, the Bureau of Labor Statistics reports.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

"A report out last month from the Consumer Financial Protection Bureau suggests myriad ways in which student loan debt may be having a ripple effect on the economy," USA Today disclosed.

For one thing, former students with significant debt may be forced to put off home ownership.

"The more homes that are built, the more things that are purchased to put in those homes," Mark Zandi, chief economist at Moody's Analytics, told USA Today.

"If you don't have households forming, the economy is going to struggle."

Most first-time home buyers rely on savings to cover a down payment, and student loan debt could be keeping prospective home buyers from saving enough for the payment.

Debt may also be forcing former students to forgo seeking car loans and to divert money from retirement accounts.

"The consequences of massive student loan debt — a trillion dollars and counting — could threaten the standard of living for this generation and harm the country's economic competitiveness," according to USA Today.

Another effect of massive student debt and unemployment or underemployment of graduates: The percentage of men ages 25 to 34 living in their parents' home rose from 13.5 percent in 2005 to nearly 17 percent last year, the Census Bureau estimates.

The Federal Reserve's Board of Governors recently warned that rising student debt has "parallels to the housing crisis," Bloomberg reported in May.

As with housing, readily available funds for student loans will likely lead to widespread default, but it is easier to repossess a home than to take back a college degree.

Adding insult to financial injury, a recent Wall Street Journal article disclosed that there are many fields in which associate degree graduates — who require far less in loans than do those with four-year degrees — can make as much or even more than bachelor's degree holders in a number of fields, including health professions.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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