More Concerns About Effects of Student Loan Debt

Published

August 5, 2014

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Millions of young adults graduate from college every year and have the hope of quickly gaining some amount of financial independence, but these days, many are having their ability to reach those goals hindered by massive amounts of student loan debt.

Federal statistics suggest that 68.1 percent of high school graduates go on to college these days, and that the average debt burden carried by young adults when they graduate college had risen to $25,250 in 2010, up 5 percent from the previous year alone, according to a report from Investopedia. That year alone, the value of student loans outstanding nationwide surpassed $100 billion, and climbed to a total of more than $1 trillion overall.

As a consequence, many experts believe that the amount of debt being carried by recent college graduates could become a significant problem for the economy as a whole, and that the problem is only going to get worse, not better, in the coming years, the report said. Over the past 50 years, college tuition costs have risen between 6 and 9 percent on average, more than twice the normal rate of inflation, and an education at even the most affordable schools is now something that many young adults will find it difficult to pay for. Some people are graduating with more than $100,000 in student loan debt to their names, and may eventually have to pay the equivalent of a mortgage payment every month for as much as 20 years to cover those costs.

Another issue that many face is that, unlike other types of debt, student loans aren’t cleared from a troubled borrower’s obligations when they file for bankruptcy, the report said. That means that even if a consumer is in dire financial straits and has no other recourse but to seek bankruptcy protection, they’ll still be responsible for every penny of their remaining student loan debt throughout that process.

Some experts say that because of these problems with student loans, it might be more difficult for recent college graduates to make other, larger purchases that are typically viewed as helping to fuel the economy, the report said.

In addition to student loan debt, recent studies have also found that many young adults are now also graduating with thousands of dollars worth of debt in their name spread across several credit cards.

Image: Ralph & Jenny via Flickr