Student debts have long been an issue in American economy. However, recent statistics show the problem is currently at an all time high. Not only are the debts difficult to pay off, but they’re also having an impact on the lives of students long after they’ve completed their degree.
Here, we’ll look at what the recent figures on student loan debt tells us about the American economy.
Fed Chairman warns student debt could hold back US economy
The Fed Chairman, Jerome Powell, has warned that student debt could hold back the US economy. Although he claims to support a vibrant education loan system, there’s a worry it’s been taken a little too far.
This comes after figures released showed the amount of education debt in the US stood at $1.38 trillion by the end of 2017. Approximately 11% of borrowers were also at least 90 days delinquent with their loans.
One thing Powell believes is adding to the problem, is that student debts cannot be included in bankruptcy. Although he doesn’t specify how student debts could impact the economy, he does claim that the larger and more prevalent the loans become, it could pose a risk of holding back the economy in years to come. At the very least, it’s going to encourage further debt, as students rely upon personal loans from companies such as Ocean Finance, to afford to get married, go on holidays and secure a deposit for a home.
30% of students unable to keep up with debt repayments
One of the most worrying statistics revealed, is that 30% of students are unable to keep up with their debt repayments after six years. This is partially down to the fact that the wages haven’t shown much sign of improvement in recent years, whereas the cost of living has increased.
This figure was discovered by the senior director for post-secondary education at the Center for American Progress, Ben Miller. He submitted a request under the Freedom of Information Act and realized the default figures are different to those released by the Department for Education. This is because the default figures released by the Department for Education, only take into account the three years, rather than six, after students leave education. So, they don’t really show the full reality of what students face in the long-term.
Couples are putting off getting married because of debt levels
Although the Fed Chairman couldn’t provide an accurate prediction of how student debt levels will impact the US economy in the future, current figures do give some idea of how the debt is already impacting the economy.
Many couples are choosing not to get married due to high debt levels. A recent poll by NBC News, discovered 62% of millennials now have more debt than they do savings. This is having a major impact on their lives, with marriage off the cards until the debts have been paid off, or at least significantly lowered.
Buying a home can prove practically impossible
It’s not just marriage that millennials are putting off. Many are also unable to afford to buy their own home. Owning property is one of the major ways Americans build up wealth, so not having the opportunity to do that because of student loans is ultimately going to impact the US economy as a whole.
Overall, student debt is having a significant impact on US economy. While being able to borrow to pay for education in this country is a major advantage, more needs to be done to ensure the repayments are affordable.