Why You Should Care About Student Loan Debt It's easy to think of it as a young person's problem, but its ripple effects are prodigious, affecting the entire national economy.
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Ignorance is starting to look more and more appealing in this age of Wikkipidiots, when young people are entering the workplace over-educated and shouldering a burden of unprecedented student loan debt. It's starting to draw a lot of media attention but very little political action. This newfound interest in millennial debt has many who didn't take out loans wondering why they should care about student load debt. It's easy to see why one may be indifferent to the issue -- in the grand scheme of things it many not seem to be all that pressing an issue, but it is.
Students are entering a work world where few employers are willing to pay a premium for a highly educated but inexperienced worker. In other words employers are seldom willing to pay an entry-level employee enough money to pay off exorbitant loans and to still live above the poverty level.
While this may seem to fall under the category of someone else's problem consider the possible ripple effects that may profoundly impact your life. Consider:
Student debt may cause another housing crisis.
Student loan debt means that college grads are staying at home longer and more grads are putting off buying homes, and those who do buy homes will likely be economizing just as empty nesters look to unload their sprawling McMansions. Aging boomers may find fewer buyers and lower offers. Even if you aren't looking to sell, this economic shift decreases the value of your home.
Student loan defaults endanger banks.
Remember the bank bail outs when people realized that simply walking away from their home loans were far easier than continuing to pay a mortgage on a house that was worth far less than they owed for it? Does it make any more financial sense to continue paying a student loan knowing that you will never see a return on that investment? In many cases college grads are realizing that they have been swindled. It's not the first time banks have loaned too much money to people who could ill afford to borrow it, and ultimately it will be the tax payers who pick up the tab. Will it trigger another Great Recession? Who knows, but it darned sure won't spur economic growth.
Student debt affects consumer spending.
Students shouldered with this debt (as well as the parents who co-signed on it) have far less credit, and less credit means fewer big-ticket consumer items from refrigerators to cruises to automobiles -- in short, the kinds of things that drive our economy. The next generation of consumers are likely to find themselves unable to purchase in the volumes necessary to preserve a middle class lifestyle.
They made their beds now let them lie in it.
It's easy to write the unfortunately indebted off by seeing this as a problem, solely of their own making. But again, things aren't that simple. The underpinning of this crisis links in several familiar factors:
- Unemployment during the great Recession created credential inflation. In economic downturns employers start looking to hire "unicorns" -- workers with an impossible list of both academic and professional experience who would work for reduced rates.
- Students stayed in school longer. Why enter a hostile work world with little to offer to those who have even less desire to hire you when you could stay in school? Or, if you lost your job, why not return to school? But school costs money.
- Banks loaned money to people likely to take a great deal of time paying to back. Financial institutions stand to make a king's ransom on the interest off student debt.
- While the economy has ostensibly improved, employers continue to look for unicorns, complaining bitterly that they can't find candidates with the right mix of experience and appropriate education. Candidates, they say, demand too much and offer too little.
Until Americans realize that the student loan crisis is real and something that affects the lives of us all, we are streaming headlong into another economic cataclysm.