By: Jeremy Kates0 comments

A recent report from the federal reserve pegged the total outstanding student loan debt at a whopping $1.53 trillion. While there is no shortage of news on this fact, it’s hard to ignore the long term effects that this will have on the economy.

Student Loan debt dragging on homeownership

Another report, by NeighborWorks America, released the findings from their national housing survey. The report details how student loan debt continues to inhibit the younger generations from affording home ownership. The Millennial generation holds the largest share of student loan debt outstanding. From  a gender perspective, women hold roughly two-thirds of outstanding debt at nearly 900 million.

Student Loan Debt
Large amounts of student loan debt continues to curtail millennial home ownership rates.

Over 50 percent report that they are burdened by their student loan debt, and almost one-third reported delaying buying a house because of their student loan debt or know someone who has delayed their purchase. Of course, the areas with higher real estate values face higher rates of delaying their purchase.

The cost of responsibility

Almost all borrowers will attest to the high price paid from student loan debt. Even with popular repayment plans, the overall problem remains, and in many cases these repayment plans just push out the amortization schedule even further and increase overall costs by pushing up the amount of interest paid. It can seem like a daunting task as continued monthly payments are made for years only to watch the principal balance barely budge.

What’s worse is that there are still those that feel little remorse for borrowers. After all, they are the one who signed the loan documents and agreed to their own now realized headaches. Most of this group may miss the bigger picture. It’s simple to say that college is not for everyone or that one should avoid loans at all costs. The truth is that most well paying jobs require higher education. Add to this the growing number of those entering college competing for the same jobs and the need to stand out. One way to stand out is by going to a more prestigious school, which of course carries a higher price tag.

Where do we go from here

The one thing that most seem to agree on is that our higher education system needs reformed. What’s not easy to agree on, however, is how to fix it. The easy availability of guaranteed loans has likely pushed the costs higher, and many think that we should reign in these guaranteed loans to force higher education institutions to lower their tuition costs. There are others who push for education to be subsidized completely by the society that benefits from its educated workforce. This would require higher taxes, but we’re already paying a tax in losses economic output from a cash strapped generation. There are a lot of compelling solutions being offered, but real structural reform is always difficult. Why would those benefitting form the current structure want it to change? We all know that the money being stuffed into lawmakers pockets tends to keep the status quo in play. It will likely take a collapse before anything changes and that’s just business as usual these days. It’s not a matter of if but when.


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