The Daily Scoop: Student Loan Debt Crushing the Economy

With the start of another school year, the air is once again filled with  angst over the high cost of college. But the discussion is shifting. It’s not  just about runaway tuition inflation anymore, or even the individual hardship  that excessive college loans create for graduates. Now we’re talking about how  student debt is everyone’s problem because it is crushing the economy.

Total student debt recently crossed the $1 trillion mark, more than Americans  collectively owe on credit cards. New findings conclude that this debt is  shutting young people out of the housing market, further depressing what is  already the economy’s most troubled sector. According to Denied: The Impact  of Student Debt on the Ability to Buy a House, a report  from the youth advocacy group Young Invincibles:

“As monthly student debt payments increase for college graduates, so does their  struggle to qualify for a mortgage. Looking at a key factor in qualifying for a  mortgage—the debt-to-income ratio—we find some disturbing results. … Home  purchases create jobs and spur economic growth. Cutting out a cohort of  graduates who previously participated in this market will add another drag to an  economy only just emerging from the Great Recession.”

This drag was probably inevitable. Student debt held at graduation has jumped  46% since 2000; total debt held by the public has soared by 511% in that period.  Fed Chief Ben Bernanke has said he does not believe student loans will foment  another financial crisis, as mortgage debt did five years ago. But the student  loan burden can’t help but forestall things like auto and home purchases.

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One Comment to “The Daily Scoop: Student Loan Debt Crushing the Economy”

  1. Hi there, MPB. Can I introduce you (and your readers) to Schalk Cloete, a South African Research Scientist living in Norway? He is the author of the Oneinbillion blog and, given what you have written above, I think that you would enjoy reading his post illustrating the similarity of Capitalism to a Ponzi Scheme. If you want to understand the context, my blog may help by giving you an overview of what Schalk is trying to do:

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