Top Ways College Students Hurt Current Debt

by Rachel Conway


America is now $1 trillion deep in student debt. This debt does not just affect those who experience it, but has a much broader reach than many people would think. People of all ages from those just entering college, to the retired should care about solving the student debt crisis. Student debt is in fact expanding at an exponential rate. In 2011, two thirds of students graduated with an average student debt of $27,000, which is an increase of $1,750 from the previous year. Today’s college attendees are forced to borrow more, and sadly future college students will most likely have to borrow even more than them. The effects of America’s student debt is not limited to students, but has a major impact on all generations, and will for years to come. Here are the top ways student debt is affecting everyone.

Student Debt is Affecting Retirees

In 2012, there were about 2.2 million retirees over the age of 60 who still had student loans that hadn’t been repaid. These people either borrowed money for their own education, or borrowed to help their children or grandchildren with the increasing costs of attending college. More than 10% of those loans were considered to be delinquent, meaning that they hadn’t been paid for at least 90 days. Delinquency not only destroys credit and affects someone’s ability to hold any sort of professional license, but if the debt comes from a federal student loan, the government has the right to seize tax refunds, and refuse to hand out Social Security Payments. This means that retirees with delinquent loans can be missing out on a significant amount of money.

Student Debt is Affecting Middle-Aged Americans

Student debt has had a great affect on baby boomers. The delinquency rate of borrows between the ages of 40 to 49 was a high 11.9% according to the Wall Street Journal. It is also reported that 45% of middle-aged people between the ages of 48 and 64 do not have enough money to save for their basic needs during retirement. Having student loans will just add to this dire situation. On top of this many baby boomers increase their loans to help their children with the increasing cost of education for their children.

Student Debt is Affecting Current Students 

Current students who are getting ready to go to college are in for an even tougher time than their parents when it comes to debt. This affects many students’ ability to take the traditional road in life. When these students graduate and began to start a family, their debt can have a negative impact on their ability to purchase a house. This is because people who have student loans, and an average amount of debt are likely to be denied access to a mortgage and other types of low-interest loans. This leads students to take drastic measures to gain access to funds, such as taking payday loans out. These loans are extremely dangerous because they come at such a high interest rate, and are easily defaulted.

Student Debt is Affecting the National Economy

Besides the devastating personal effects that student debt has on savings and credit, there is also a great effect on the national economy. This is because 143,000 first-time homebuyers would create about 86,000 new jobs, and if private residential investment returned to its average of 4.5% of GDP it would create close to 2.9 million jobs. Unfortunately, the national student debt is one of the contributing factors that stops this from happening.

Student Debt is Affecting Investments and Pensions

Because students in college and recently graduated students have reduced spending power, overall investments and pensions are restricted. This is due to the fact that millions of middle-aged Americans rely on professionals who are college educated to purchase retirement funds for them. However, because these professionals have less money that they can invest, these funds will drop.

Unless student debt trends are reversed, the next couple of decades will bring much greater costs, debt, and delinquency-which will affect us all.

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This post was written by Rachel Conway

Rachel Conway is a staff editor at CCTS. She transferred from community college to Cornell University and enjoys helping students with this community college guide.

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