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The Long-Term Impact of Massive Student Loan Debt

Aug 2, 2010 Jennifer Williamson, Distance Columnist | 0 Comments

Students are graduating with an average of over $23,000 in student debt as of 2007-2008 studies, according to FinAid. Some students with four-year degrees have debt loads of $50,000 or more. Master’s or doctoral studies can add more to the tab—with some PhD graduates in debt by over $100,000.

Nowadays, many adults start off in life with a student debt load equivalent to buying a house—with no actual house to show for it. For years, student debt was looked upon as “good debt” because it gave you a credential that was supposed to open doors to a lucrative career. But for many graduates, the “lucrative” part hasn’t turned out to be true—and for many others, the “career” part hasn’t, either. In today’s economy, it’s tough for a recent graduate to find a job at all, much less one that will help them meet student loan obligations and still have enough left over to start an adult life.

What are the long-term effects of so much student debt? It’s difficult to say. Few long-term studies exist, and costs were lower for education a few decades ago. Law school tuition is up 267% since 1960, for instance, and the average private student loan debt in 1990 was only $15,054.

But with increasing numbers of students graduating with debt loads of over $20,000, it’s sure to have some impact on our economy. Here are a few of the long-term effects that might show up later—and that are starting to show up now.

Student Loan Bubble

Young people with large amounts of student debt have less freedom to make adult moves like buying homes, having kids, and marriage.



Delayed adulthood

Ask anyone you know who graduated in the last three years, and chances are they’re either still living at home—or they know someone who is. One effect of starting life with a large debt level is that you can’t afford to take the steps that establish you as an adult—such as moving out on your own, getting married, and having a family.

According to a paper by Allan C. Carson, PhD for the Project on Student Debt, the number of people who reported delaying marriage because of student loans went up from 9% in 1987 to 14% in 2002. The number of people who delayed having children because of loans nearly doubled in the same time frame, going from 12% to 21%.

Less risk-taking

When you’re young, you have no expensive mortgage and no family to support—so you can take risks that sometimes pay off. Except when you’re saddled with large amounts of student debt. In this case, you have to choose the stable, well-paying job instead of starting your own business or taking a less lucrative but more inspiring job that might lead to a more satisfying career. You’re stuck making career decisions based on money and not on what you want—which can suppress risk-taking and innovation.

Lower rates of home buying

When you start your adult life with as much debt as you might incur in buying a small house, it can be tough to commit to buying an actual house. And when you’re putting all your extra cash toward student loans, it can be hard to save up for a down payment on a home.

According to an article in Investors Business Daily, the average age for purchasing a home is currently at 30—and many experts expect that age to rise.

A depressed economy

Young people with large amounts of student debt have less freedom to make adult moves like buying homes, having kids, and getting married. They have less financial stability, less ability to spend, and less freedom to choose to take risks that could pay off for the economy as well as for themselves. Over time, this could lead to persistent long-term economic problems nationwide.

Millions of students graduate college every year with large amounts of student debt. The impact of this on the economy is already being felt.  Comprehensive student loan reform may save us from persistent economic problems caused by excessive debt—if it’s enacted in time.


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