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Nov-02-18 To show a divergent perspective

Article 1- Student Loan Debt Statistics in 2018: A $1.5 million dollar Crisis

Student loan debt is now the second highest consumer debt category - behind only mortgage debt - and higher than both credit cards and auto loans.

According to Make Lemonade, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. The average student in the Class of 2016 has $37,172 in student loan debt.

The latest student loan debt statistics for 2018 show how serious the student loan debt crisis has become - for borrowers across all demographics and age groups.

If you are a student loan borrower, the following student loan debt statistics can help you make more informed decisions regarding student loan refinance, student loan consolidation, student loan repayment and student loan forgiveness.

Student Loan Statistics: Overview

Total Student Loan Debt: $1.52 trillion

Total U.S. Borrowers With Student Loan Debt: 44.2 million

Student Loan Delinquency Or Default Rate: 10.7% (90+ days delinquent)

Total Increase In Student Loan Debt In Most Recent Quarter: $29 billion

New Delinquent Balances (30+ days): $32.6 billion

New Delinquent Balances - Seriously Delinquent (90+ days): $31 billion

(Source: As of 1Q 2018, Federal Reserve & New York Federal Reserve)


States With The Most Student Loan Debt

Not surprisingly, states with larger populations have higher aggregate student loan debt. California, Florida, Texas and New York are among the four highest states for total student loan debt outstanding among resident borrowers.

California, Florida, Texas and New York represent more than 20% of all U.S. student loan borrowers.

High Student Loan Debt States & Low Student Loan Debt States

New Hampshire has the highest average student loan debt per student ($36,367) from the Class of 2016.

Utah has the lowest average student loan debt per student ($19,975) from the Class of 2016.

Student Loan Debt Per Capita In Select U.S. States

In the U.S., as of 2016, the average student loan debt per capita is $4,920. Pennsylvania, New York and Michigan have among the highest student loan debt per capita in the nation.

Arizona: $4,760

California: $4,160

Florida: $4,480

Michigan: $5,330

New York: $5,570

Ohio: $5,700

Pennsylvania: $5,690

Texas: $4,510

Distribution Of Student Loan Borrowers By Balance

As of 2018, more than 42 million student loan borrowers have student loan debt of $100,000 or less.

More than 2 million student loan borrowers have student loan debt greater than $100,000, with 415,000 of that total holding student loan debt greater than $200,000.

The largest concentration of student loan debt is $10,000 - $25,000, which accounts for 12.4 million student loan borrowers.

Total Student Loan Balances By Age Group

Over the past five years, student loan debt balances have grown across each age category.

On a percentage basis, the largest increase in student loan debt has come from a surprising age group: 60 to 69-year-olds, who have experienced an 71.5% increase in student loan debt. However, on a dollar basis, this age group represents a $35.6 billion increase over the same period, which is the lowest increase among all age groups.

On a dollar basis, the highest increase in student loan debt is among 30 to 39-year-olds, who as a group now hold over $461 billion in student loans. On a percentage basis, the amount of student loan debt held by 30-39 year-olds has increased 30.2% over the past five years.

Number Of Student Loan Borrowers By Age Group

The largest concentration of student loan borrowers is under 30-years-old, followed by the 30-39 age group.

Therefore, there are 29.1 million student loan borrowers under the age of 39, with this group representing approximately 65% of all student loan borrowers.

As of 2017, here is the breakdown of student loan borrowers by age.

< 30-years-old: 16.8 million

30-39: 12.3 million

40-49: 7.3 million

50-59: 5.2 million

60+: 3.2 million

Student Loan Debt Outstanding By Student Loan Program

Over 33 million student loan borrowers hold approximately $1.1 billion in Direct Loans. Another 14.5 million student loan borrowers hold $301 billion in Federal Family Education Loans (FFEL).

Direct Loans: $1,066.8 billion (33.3 million borrowers)

Federal Family Education Loans (FFEL): $301.1 billion (14.5 million borrowers)

Perkins Loans: $7.6 billion (2.5 million borrowers)

TOTAL: $1,375.5 billion


Student Loan Debt Outstanding By Student Loan Type

Stafford Subsidized: $272.2 billion (29.6 million borrowers)

Stafford Unsubsidized: $463.3 billion (28.4 million borrowers)

Stafford Combined: $735.5 billion (33.0 million unique borrowers)

Grad PLUS: $59.6 billion (1.2 million borrowers)

Parent PLUS: $83.7 billion (3.5 million borrowers)

Perkins: $7.6 billion (2.5 million borrowers)

Consolidation: $489.0 billion (12.0 million borrowers)


Student Loan Debt Statistics By Loan Status For Direct Loans

Approximately $600 billion in Direct Loans across 17.8 million student loan borrowers are in student loan repayment. Approximately 11 million student loan borrowers are in student loan deferment, student loan forbearance or student loan default.

Student Loans In School: $133.5 billion (7.4 million borrowers)

Student Loans In Repayment: $600.0 billion (17.8 million borrowers)

Student Loans In Deferment: $103.0 billion (3.3 million borrowers)

Student Loans in Forbearance: $108.3 billion borrowers (2.6 million borrowers)

Student Loans In Default: $88.4 billion (4.7 million borrowers)

Student Loans In Grace Period: $25.9 billion borrowers (1.2 million borrowers)


Student Loan Debt Statistics By Repayment Plan For Direct Loans

There are 12.8 million borrowers with $233.5 billion of student loan debt in the Level Student Loan Repayment Plan (student loan repayment in 10 years or less), which represents the largest concentration of borrowers in student loan repayment.

The second most concentrated group of borrowers is enrolled in Income-Based Repayment (IBR) at $192.0 billion and 3.6 million borrowers.

Level Repayment Plan (< 10 years): $233.5 billion (12.8 million borrowers)

Level Repayment Plan (> 10 years): $79.1 billion (1.8 million borrowers)

Graduated Repayment Plan (< 10 years): $88.3 billion (3.3 million borrowers)

Graduated Repayment Plan (> 10 years): $14.3 billion (0.3 million borrowers)

Income-Contingent Repayment (ICR) Plan: $27.6 billion (0.6 million borrowers)

Income-Based Repayment (IBR) Plan: $192.0 billion (3.6 million borrowers)

Pay As You Earn (PAYE) Plan: $68.3 billion (1.2 million borrowers)

Revised Pay As You Earn (REPAYE) Plan: $108.8 billion (2.0 million borrowers)

Article 2- The Student Debt Problem is Worse ThanWe Imagined

Millions of students will arrive on college campuses soon, and they will share a similar burden: college debt. The typical student borrower will take out $6,600 in a single year, averaging $22,000 in debt by graduation, according to the National Center for Education Statistics.

There are two ways to measure whether borrowers can repay those loans: There’s what the federal government looks at to judge colleges, and then there’s the real story. The latter is coming to light, and it’s not pretty.

Consider the official statistics: Of borrowers who started repaying in 2012, just over 10 percent had defaulted three years later. That’s not too bad — but it’s not the whole story. Federal data never before released shows that the default rate continued climbing to 16 percent over the next two years, after official tracking ended, meaning more than 841,000 borrowers were in default. Nearly as many were severely delinquent or not repaying their loans (for reasons besides going back to school or being in the military). The share of students facing serious struggles rose to 30 percent over all.

Tracking period ends

SHARE OF STUDENTS

DEFAULTING ON LOANS

15.5%

10%

10.4%

Students begin

repaying loans

5

0

2012

2013

2014

2015

2016

Collectively, these borrowers owed over $23 billion, including more than $9 billion in default.

Nationally, those are crisis-level results, and they reveal how colleges are benefiting from billions in financial aid while students are left with debt they cannot repay. The Department of Education recently provided this new data on over 5,000 schools across the country in response to my Freedom of Information Act request.

The new data makes clear that the federal government overlooks early warning signs by focusing solely on default rates over the first three years of repayment. That’s the time period Congress requires the Department of Education to use when calculating default rates.

At that time, about one-quarter of the cohort — or nearly 1.3 million borrowers — were not in default, but were either severely delinquent or not paying their loans. Two years later, many of these borrowers were either still not paying or had defaulted. Nearly 280,000 borrowers defaulted between years three and five.

Federal laws attempting to keep schools accountable are not doing enough to stop loan problems. The law requires that all colleges participating in the student loan program keep their share of borrowers who default below 30 percent for three consecutive years or 40 percent in any single year. We can consider anything above 30 percent to be a “high” default rate. That’s a low bar.

Among the group who started repaying in 2012, just 93 of their colleges had high default rates after three years and 15 were at immediate risk of losing access to aid. Two years later, after the Department of Education stopped tracking results, 636 schools had high default rates.

24.9%

20

15

AVERAGE DEFAULT RATES

BY SCHOOL TYPE

14.6%

13.5%

tracking

ends

10

10.6%

tracking

ends

8.5%

5

5.0%

tracking

ends

0

2012

‘13

‘14

‘15

‘16

‘12

‘13

‘14

‘15

‘16

‘12

‘13

‘14

‘15

‘16

PRIVATE NONPROFIT

PUBLIC COLLEGE

PRIVATE FOR-PROFIT

For-profit institutions have particularly awful results. Five years into repayment, 44 percent of borrowers at these schools faced some type of loan distress, including 25 percent who defaulted. Most students who defaulted between three and five years in repayment attended a for-profit college.

The secret to avoiding accountability? Colleges are aggressively pushing borrowers to use repayment options known as deferments or forbearances that allow borrowers to stop their payments without going into delinquency or defaulting. Nearly 20 percent of borrowers at schools that had high default rates at year five but not at year three used one of these payment-pausing options.

SHARE OF STUDENTS WITH DEFERMENTS OR IN DEFAULT

Among schools with high default rates in 2016 but not 2014

Deferments

43.4%

In default

34.4%

30%

Tracking period ends

20

10

0

2012

2013

2014

2015

2016

Note: Deferments exclude borrowers in the military or back in school. “High” default rates are 30% or greater. Source: Department of Education

The federal government cannot keep turning a blind eye while almost one-third of student loan borrowers struggle. Fortunately, efforts to rewrite federal higher-education laws present an opportunity to address these shortcomings. This should include losing federal aid if borrowers are not repaying their loans — even if they do not default. Loan performance should also be tracked for at least five years instead of three.

The federal government, states and institutions also need to make significant investments in college affordability to reduce the number of students who need a loan in the first place. Too many borrowers and defaulters are low-income students, the very people who would receive only grant aid under a rational system for college financing. Forcing these students to borrow has turned one of America’s best investments in socioeconomic mobility — college — into a debt trap for far too many.

Article 3- Betrayed by the Dream Factory

very once in a while, when I’m feeling overwhelmed, I watch college commencement ceremonies on YouTube. These rituals remind me how perverse our higher-education system is—and of the empty idealism that colleges and universities sell us: We are here today, donning our ceremonial robes and caps, to recite the traditional vacuous platitudes and wish you well in paying off high-interest student loans for which we are in no way held accountable. Let us now further romanticize our fair institution by singing the alma mater and conveniently forget that tuition has gone up 1,120 percent since 1978. Good luck out there, kids!

I’m a consumer of those vacuous platitudes and a victim of this system. After finishing my master’s degree in 2008, I found out—as in, I didn’t already know—that I had $200,000 in student debt.

Some well-paying professions might make this amount manageable, but for a bioethicist like me, it’s been crushing. Many things had to go wrong for this to happen—or right, if you’re a school or a lender. Although the hefty amount I owe is unusual, my experience is not: Motivated by an idealistic view of education and career and vulnerable to predatory, disingenuous, or at least negligent institutions, young people and their families too often take on large amounts of student debt. No matter how much they owe, the consequences of that debt can be outsized. These young people may have to abandon their educations early; pay back far more, after interest, than they took out; manage exceptionally exploitative loan terms; shoulder serious, chronic mental distress; delay important life decisions; and participate less in the economy than they otherwise would.

I don’t question the importance of higher education. But the detrimental effects of crushing debt shouldn’t be the shared experience of millions of young people and their families. Currently, about 40 million Americans owe $1.2 trillion in student loan debt, and it continues to grow. According to the Institute for College Access and Success, students who borrow graduate with an average debt of $29,000 for a bachelor’s degree. In 2014, 69 percent of graduates had student loan debt, and from 2004 to 2014, the average college debt grew at more than double the rate of inflation. Even with smaller amounts of debt than mine, starting a life quickly becomes very hard. So how do people get to this point? We’ve debated student debt for decades, but our understanding of how it shapes a young person’s experience—from naïve teenager to indebted young adult—is still limited. Here’s what happened to me.

* * *

When I was 17 I was just starting to get the hang of school. My siblings and I had the privilege of expecting we would attend private colleges, which seemed reasonable—others in our family had done it, friends had done it, so we should be able to do it. My grades weren’t good enough for Connecticut’s Wesleyan University, so after getting rejected I quickly applied binding early decision to one of its conference rivals, Connecticut College, where my brother was a senior. I was very eager—and very fortunate—to get in. It was one of the most validating moments of 17-year-old Sam’s life.

Despite its cost, Conn sold my family on its purportedly outstanding financial aid. When I was a freshman in 2003, the comprehensive fee, including tuition, room and board, and other fees, was about $40,000 a year; it climbed to about $46,000 by 2007, my senior year. A decade later, the comprehensive annual fee at Connecticut College (and many private colleges) is more than $60,000 per year. And about half the students pay full price. That must be because a bachelor’s degree from a private college is $80,000 more valuable than it was 10 years ago, right? No, that’s crap. These days, I can’t imagine any bachelor’s degree that is worth $240,000. But my parents couldn’t know tuition would rise so much, and my brother seemed to fare OK there—he got substantial grant funding that helped him leave with much less, and more manageable, federal debt.

Slate Academy: The United States of Debt

How did debt get so bad in the United States? Join personal finance columnist Helaine Olen as she takes in-depth look at the reality of debt in America. What’s it like to empty out your 401(k) to help a family member? How does a first-generation college student navigate student loans at a for-profit school? What works—and what doesn’t—for people struggling to get out of debt? Find out in this series. Join us today.

I knew that my parents were financially stressed because of a fire that destroyed most of our home when I was 15 and because my dad had been struggling with his career for a few years. Given my brother’s experience, we expected that Conn would help us make school affordable. Like many college websites, Conn’s website even says, “Don't let financial concerns discourage you from applying to Connecticut College. We offer generous financial aid.” In my parents’ attempt to protect me from the brunt of their financial hardship, they minimized my understanding of what it would take to pay for school.

When I began college I knew Conn had given us a fair amount of grant funding—money that didn’t need to be paid back—and I believed my parents and small federal loans were covering the rest. I visited the financial aid office to sign for these federal loans each semester. Like so many students, I thought signing loan documents was just a routine. Having no appreciation of financial adulthood, I didn’t really understand what these loans were or what repaying them would actually entail—and in a very different student loan terrain than their college days, my parents didn’t either. But I thought I understood. I was in the right place, talking to the right people, doing what I was told was necessary. The college made no serious effort to explain my loans until an exit interview at the end of senior year.

Having followed the common advice to study what I loved, I had abandoned my initial plans to focus on biology and majored in music performance, but also minored in philosophy and was a few courses short of pre-med. By my senior year, however, I realized I was drawn to a subfield of applied ethics called bioethics, which deals with controversial ethical issues in science and medicine. Well-meaning faculty could only advise me on careers in academia. Academia was the setting I knew, so that became my plan: build an academic career in bioethics.

At my exit interview, the college reviewed only my federal loans with me. There was no mention of any private loans. And because student loans are deferred as long as you’re in school, I hadn’t received a bill. Everything they described to me was still an abstraction.

* * *

If only I had been friends with 2016 Sam in 2007, then maybe I would have done things differently. But I wasn’t. So, still unaware of my total debt, I went on for a bioethics master’s degree to bolster my chances of getting into a good Ph.D. program. After starting courses at the University of Pennsylvania, I took out $70,000 in loans for tuition and living expenses, which I supplemented with income from part-time jobs. The associate director of the program suggested I work at Penn full-time and do the degree part-time for free. Looking back, that was obviously sage advice, but I thought the sooner I started a Ph.D. the better.

Save that one brief comment, no one, in five years of higher education, advised me differently or really broke down the cost of my education choices. Why would they? Schools benefit immensely from this ignorance. In fact, several students, faculty, and friends—many of whom had high-paying jobs—told me not to worry about my loans and that I’d pay them back without undue stress.

After completing my master’s in 2008, I got a job working as a contractor science policy analyst at the National Institutes of Health in Bethesda, Maryland. I was lucky to land a good, bioethics-related job in a very bad economy. Like most people with loans, I started getting repayment letters within six months of leaving school.

I already knew that I had about $70,000 in federal loans from Penn and some federal loans from Conn—but I had no idea I also owed $100,000 in Sallie Mae–serviced private loans.

I was shocked. It turned out that my parents and Conn had had me ink them during my semesterly flurry of document-signing without discussing them with me. Now I was making $50,000 a year in an expensive region with close to $200,000 in loans. I was completely unfamiliar with the—at the time very limited—repayment options. It was a nightmare.

The decisions were unwise, certainly. But while I was in school, my parents were too stressed and embarrassed to take stock of my loans. They wanted me to focus on doing well and felt, as do many middle-class families, that they were in a financial Catch-22: They made too much to get enough aid but not enough to cover the cost of college. Financial aid awards come once per year, giving them little time to plan, and again, they expected similar aid and tuition rates as my brother. They’d lost much of their savings dealing with career challenges and the house fire. They didn’t want to take me out of a school I was heavily invested in. Given the grant funding I received every year from Conn, even if they had pulled me out and sent me to our flagship state school—the University of Wisconsin—the full cost there still could have left me with a fair amount of debt.

I now saw what my trust and ignorance had cost. So I was angry. But I felt especially betrayed by the well-manicured dream factories that had educated me.

* * *

When I first started receiving loan statements, I was so distraught and confused that I missed a few months of payments and got a delinquency reported on my credit—not an uncommon occurrence for postgrads. After months of receiving inconsistent information from Sallie Mae, I got my payments in order. I made interest-only payments for my private loans because the interest rates were too high for me to make full payments. (Some of my loans had rates of 8 to 9 percent—compare that with the less than 4 percent for which one currently can get a mortgage.) I enrolled in the new income-based repayment program for my federal loans, and for years I tried to refinance my private loans to lower my interest rates. I attempted to refinance about half a dozen times but was rejected each time for having a weak credit score, delinquency, and too low a salary.

Some relief came in 2011 when I started a new job as a contractor bioethicist in NIH’s Division of AIDS. This was very fortunate, given the economy and the limited career options for someone with a master’s in my field. My salary jumped to about $70,000, an increase of almost 50 percent. I was grateful but keenly aware that this meant something very different for me than it would have without the unrelenting scythe of my debt.

With every bump in salary comes a bump in payments. My current payment is about $1,500 a month—that’s almost 40 percent of my take-home pay—and despite having paid more than $75,000 toward my loans, I still owe about $190,000. Remember, I started with $200,000 in debt. With more than eight years of some of my private loans at 8 and 9 percent interest, and my federal loans at more than 6 percent, Sallie Mae and the federal government have made it very hard to make progress.

My debt may take decades to pay off and ultimately cost more than twice my original balance. Depending on my income, my payments could peak at almost $2,000 a month. Without a substantial boost in salary, there’s no way to get ahead of my debt. How do I get that salary? The surest way for me to move up in my field would be to get a funded Ph.D., but that would entail deferring my loans and allowing my interest rates to add almost $50,000 to my current balance.

Is it worth leaving the field that I’ve already invested so much in? What about jobs or programs that offer loan repayment? Unfortunately, many of these jobs (for example, some federal ones) are very difficult to get (I’ve tried and am still trying), and many programs (such as Peace Corps) aren’t worth the cut in income. I also worked for a for-profit contractor for part of my time at NIH, so several years of my time there don’t count toward the public service loan forgiveness program. Can I transition to a career that makes more money but is stable and reliable? How do I stay nimble in this economy when education is so expensive but so essential? Will I ever be able to afford a family?

Plagued by these questions and by years of significant and unrelenting stress over managing my debt, I hit a low point last year. In preparation for a speech I gave at one of Sen. Elizabeth Warren’s student debt press conferences, I learned about “auto-default”: Under Sallie Mae loan contracts, your loans are automatically placed into default and sent to collections if a co-signer dies. My grandmother—who is 93 and has Alzheimer’s—is a co-signer on some of my private loans. According to my loan contract, when she dies all $100,000 of my private loans will go into default. This means that I could be required to pay the full loan amount immediately or risk being sued, having assets seized, wages garnished, and my credit wrecked. In most circumstances, student loans cannot be discharged in bankruptcy—and, under some contracts, if you start bankruptcy proceedings, your loans can be placed into default.

After screwing over a lot of people, this insane policy got slammed with media coverage, forcing Sallie Mae to modify it, but it wasn’t clear if these changes applied to me. So I spent several months trying to get out of this trap. I could barely focus on anything else. I had several Sallie Mae reps confirm that when my grandmother dies, I would auto-default and owe $100,000. I thought maybe I should get a lawyer, flee the country, or sell a kidney. I was finally put in touch with a rep from Sallie Mae who sent me an official letter stating that, essentially, because my grandmother had no assets I would continue to make my payments as I had been.

Fortunately, after that, I was also able to refinance some of these loans with a good, financially stable, and not-likely-to-die-soon friend (thanks, Steve) as a co-signer. After six years of attempts, I was actually able to start paying more of my principal balance.

My situation has finally stabilized, and I should be able to avoid default, though things haven’t improved otherwise. My payments are still crushing, they will be around for decades, and they severely limit my life choices.

* * *

And all of this to go to school.

Yes, I’ve been more fortunate than many: I was educated at elite schools, I live in a city with a strong economy, and I’ve had two good jobs. But I still struggle to find ways to retool myself for higher-paying careers that would help me dig out from my debt faster or to advance in my current path. My parents and I are working on ways to improve my situation. But, like many baby boomers, they are burdened with their own financial responsibilities, like taking care of my grandmother and their own health and saving for their retirement. It’s true that my parents and I made poor financial choices, but they were ones that the system strongly encouraged. I’ve worked hard to take responsibility, make my monthly payments, advance in my career, and live modestly. While I’ve been lucky enough to avoid some of the most disastrous consequences of having student loans, like default, I will still spend the majority of my emotional and intellectual energy trying to find a way out of this, rather than trying to forge a career and a life.

The amount I owe is uncommon, but my story is not. The data show that millions are struggling with large amounts of student debt—debt that will result in some of the painful experiences I have gone through. So at a minimum, I hope this serves as a lesson to stay informed and temper your academic ambition with consideration of the financial costs and the investment you’re making.

But that doesn’t get to the heart of the systemic problem: Education is outrageously expensive and too risky; schools indoctrinate students and their families with lofty ideals and benefit from their ignorance without accountability; and students and their families can borrow at unprecedented rates, allowing schools to continue hiking tuition. Though its advent was surely well-intentioned, our loan system is confusing and exploitative.

DMU Timestamp: September 17, 2018 17:21

Added November 02, 2018 at 6:56pm by Ari Elorreaga
Title: To show a divergent perspective

https://studentloanhero.com/featured/effects-of-student-loan-debt-us-economy/

The phrase “student debt” seems to rarely pop up in a news headline these days without being followed by the word “crisis.”

First off, the total amount of student debt has almost reached a staggering $1.3 trillion. And while more than 44 million Americans have student debt, about 7 million are also in student loan default as of last year.

What’s more, among the 70 percent of college graduates with student debt, the average balance is over $37,000.

Still, while some view overall student loan debt as limiting for the U.S. economy, others see it as an important investment in human capital.

Although many economists have looked into how student loans affect the economy, it can be tricky to measure the impact student loan debt has on an individual level. Let alone a national level.

Yet, when we took a deep dive we were able to take note of a few trends indicating how student loan debt affects the economy. Here’s everything we found about it: the good, the bad, and the somewhat surprising.

Negative effects of student loan debt

On an individual level, the limiting effects of student loan debt are obvious. Mostly because those with debts have the financial obligation of making monthly student loan payments.

Essentially, when 44 million Americans are putting a big chunk of their monthly income towards their student debts, they aren’t spending on other economy-boosting goods or services. They’ll also have less money to save, invest, or even start a business.

Here are three main ways student loans can indirectly limit or slow economic growth in the U.S.

1. Student loan debt stifles spending

Many student loan borrowers choose to spend less. Or, they can’t afford to spend on items they otherwise feel ready to buy.

For example, nearly half of student loan borrowers have put off buying a car because of their student loan debt, according to our survey from last year.

And even during the holiday season, a third of shoppers say they will limit holiday spending due to student debt.

In the U.S., when people pay for goods and services, it keeps the economy running and growing. So for a consumer-driven economy like ours, less spending means lower revenues and profits. Which in turn can slow financial growth.

2. Student debt slows the housing market

Student loans definitely hold back borrowers who would otherwise be saving for or purchasing a home.

Among student loan borrowers, 41 percent have delayed homeownership. Meanwhile, 27 percent haven’t even managed to make it out of their parent’s home yet.

With fewer homebuyers, home prices stagnate. And, homeowners are less likely to build equity in their home.

Home-buying is also tied to the mortgage market. If fewer people are buying homes then fewer people are likely to take out mortgage loans, which can be an important revenue source for banks and investment firms alike.

3. Student debt holds back new businesses

Another important growth factor in the American economy is the growth of new businesses.

Overall, more student debt means fewer new businesses, according to a report from the Federal Reserve Bank of Philadelphia.

Among recent graduates, one in five says that their student loans are holding them back from starting a business, according to the 2015 Gallup-Purdue Index.

And, 25 percent of graduates with higher student loans (more than $25,000) are delaying their plans to start a business due to those debts.

Additionally, for those who take the plunge and try to start a business, getting approved for business loans is harder with student debt.

Ultimately, student loans get in the way of the spending and business engines that power the U.S. economy. And this has far-reaching, indirect effects linked to slow economic growth and productivity.

How student loans affect the economy — for the better

Student loans definitely hold back borrowers financially. And, by extension, the economy.

But a recent report from the White House controversially asserts that student debt is a net positive for the American economy.

“The main macroeconomic impact of student loans, particularly over the longer run, is via the boost to output and productivity from a more educated workforce,” the White House said in its 2016 report Investing in Higher Education.

Overall, according to the report, student debt is a tool that helps more Americans access a college education. And with a higher education attainment comes a windfall of benefits for individuals and the economy.

4. College degrees raise incomes

A major benefit of a college degree (and student loans that enable earning them) is higher incomes.

Workers who attain a bachelor’s degree gain $1 million in lifetime earnings, according to the White House report. Higher incomes mean these graduates will actually have more money to spend throughout their life.

It’s true that today’s college graduates have more student debt and cannot spend as freely as past generations. But the White House report also found that compared to non-college-educated workers, their earnings still put them far ahead in measurements like homeownership.

5. Lower unemployment

Unemployment is a key economic health indicator. The more jobs that are added, the stronger a country’s business sector becomes.

The White House report also showed that “Individuals with college degrees also see lower unemployment rates and have increased odds of moving up the economic ladder.”

What’s more, unemployment rates among workers with a bachelor’s degree are 41 percent lower than those with an associate’s degree or some college, according to data from the Bureau of Labor Statistics.

And at 2.7 percent, college graduates are just less than half as likely to be unemployed as the average American with the U.S. unemployment rate at 4.9 percent.

More jobs also mean more individuals are earning incomes, keeping up with living expenses, and putting money back into the economy and government.

6. Increases tax revenues

Student debts, and the programs President Obama has introduced to help borrowers manage them are costly for taxpayers.

And, recent estimates show that federal student loan forgiveness programs are set to cost significantly more than previously projected, to the tune of $108 billion.

But while these student debt management programs do cost taxpayers, they can also be viewed as an investment in a college-educated workforce. Workers who are college-educated are more productive and earn more — and pay more taxes, in turn.

“Graduating from college rather than ending schooling with some college was associated with the largest increase in tax payments,” according to a research brief from the RAND Corporation.

Student debt definitely has its downsides for the economy. But the overall impact of student loan debt is a net positive for the economy — at least for now.

However, if college costs continue to rise, they could outpace the actual value of a college education. Still, in today’s world, an investment in a college degree still pays off. Both at the individual and the national level.

DMU Timestamp: November 02, 2018 17:13