The Long-Term Effects of Student-Loan Debt

Frank Donoghue:

First, let's break down the staggering $1-trillion in student debt that has become so familiar a number to all of us in the last year or so. First, according to the Consumer Financial Protection Bureau, as quoted in Sheryl Nance-Nash's recent article in Forbes, "Unlike other consumer credit products, student debt keeps growing at a steady clip. Students borrowed $117-billion in just federal loans last year. And students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans." The average total loan debt for undergraduates is $26,000, with the debt for those choosing to attend law school, medical school, or business school obviously much greater.

This enormous amount of debt has consequences for all of us since--although few economists discuss it at length--it represents a tremendous drain on the economy and is slowing our recovery from the recession that began in 2008. College graduates and postgraduates, instead of buying cars, buying houses, getting married, having children--in other words, becoming full-fledged consumers are, as Nance-Nash puts it, "running back home." That hurts us all.

Posted by Jim Zellmer at April 16, 2012 2:09 AM
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