Exceeding $1 trillion, student debt now outpaces credit card debt. Ever-increasing college tuition is forcing more and more students to borrow, with 94 percent of students who earn bachelor’s degrees taking out loans to pay for college, according to The New York Times.
In Iowa, the average student graduates with $29,598 worth of debt, surpassing the national average of $23,300. The state has the third-highest per capita student loan debt in the country, coming in behind Maine, $29,983, and New Hampshire, $31,048.
These numbers could grow substantially higher. Come July 1, interest rates on federal student loans will double from 3.4 percent to 6.8 percent unless Congress is able to agree on how to stop it.
Crippling debt is forcing some young adults to move back home, take on multiple jobs or hold off on certain milestones, like getting married and starting a family. But student debt hurts more Americans than just recent graduates. The Business Record asked three experts to outline the biggest effect student debt has on the economy:
How does student debt affect the economy?
“The ability for students to borrow has become more important because the cost of college has increased more rapidly than incomes have. But in terms of carrying around that burden, a lot of folks will have outstanding student loans well into their careers, which makes it harder to save for retirement or pay for their own children’s education.”
– Mark Vitner,
Senior economist,
Wells Fargo Securities
“There are two things that I think about. With the increasing levels of young graduates’ earnings going into debt services, it means their earnings are not going into consumption, whether that is the purchase of their first home or the consumption of other goods. That can be a drag on the economy. But over the last 10 years, we have seen a significant increase in the cost of higher education, so if families have to pay more, then that limits their ability to consume too.”
– David Swenson,
Economist,
Iowa State University
“We don’t specifically know how much of this is caused by student debt, the job market or students just not having the credit scores, but we have seen a collapse in the ‘traditional’ household structure. Generally, once students graduate, they move into an apartment and then a townhome and then a starter home. But this is being delayed two, three, four years, which definitely impacts the housing market. It’s keeping kids at home, or they’re doubling up in apartments.”
