NCPA - National Center for Policy Analysis

Millennials' Ball-and-Chain: Student Loan Debt

July 5, 2013

For many 20- and 30-somethings, paying off the cost of college takes priority. Marriage, a house and family will have to wait, says USA Today.

A report out last month from the Consumer Financial Protection Bureau suggests myriad ways in which student loan debt may be having a ripple effect on the economy. Based on more than 28,000 comments submitted by consumers and industry leaders, the report found that debt held by millions of Millennials may be forcing this generation to:

  • Put off home ownership.
  • Divert money from retirement accounts.
  • Impede the ability to take small-business loans.
  • Forgo securing car loans.

Though hard data linking student loan debt to a delay in these financial commitments are elusive, personal finance experts say that when one is saddled with any kind of debt, economic lives can grind to a halt. The consequences of massive student loan debt -- a trillion dollars and counting -- could threaten the standard of living for this generation and harm the country's economic competitiveness.

Millions of college students are graduating into a slowly improving economy in which many still find themselves unemployed or underemployed.

  • The Project on Student Debt found that two-thirds of 2011 college graduates -- the most recent year for which data are available -- graduated with an average student loan debt of $26,600, or $27,500 when adjusted for inflation.
  • Contrast that with 1993, when less than half of students graduated with debt, and those who did averaged $9,350, according to data from the Project on Student Debt.
  • In today's dollars, that's about $15,000.

As loans become the go-to way to finance education in the United States, experts say, this generation could be the canary in the coal mine for what the nation might see going forward. Today, Millennials are paying the price, but the loan crisis, they say, has a much longer tail.

The consequences of a rising debt load may not be immediately noticeable in the years just after students graduate, but the long-term impact could be crushing.

Source: Hadley Malcolm, "Millennials' Ball-and-Chain: Student Loan Debt," USA Today, July 1, 2013.


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