Student Loan Debt May Cause Massive Repercussions In The US EconomyBy Francis Trance
Students who rely on student loans might find it difficult to enter society and be productive. Studies have shown that college graduates with outstanding debts are unlikely to be homeowners immediately after entering society.
According to analysts, as reported by Bloomberg Markets, the interest's rates in the United States is being weighed down by student loan debts, which can linger well beyond graduation. Because of this, many are clamoring to make state colleges free. William Dudley, President of the Federal Reserve Bank of New York said that the student debt problem will lower household consumer spending as they try to pay off debts first.
Debts will also cast its ugly shadow on credit score of students, which makes it more important to settle it first before anything else. CNBC reported that overall household debt might surpass pre-recessions levels this year. Also student loans from 2006 will now have aggregated to a towering $1.3 billion.
The repercussion of this generally show on decrease in consumer spending. However, with the increase in education rates, student in low-income families will undoubtedly be hampered from any uplift in their income mobility.
Free education is one of the major political moves that the administration might undertake, but at the moment, it has been a conscious political move not to push forward free education.
Students will have a hard time coping immediately out of college, as student debts will lower credit score, which in turn will make it harder for them to get auto loans and such. Most students are caught immediately in a looped rat race, where one can't easily escape from.
Unless the government steps in and alter the situation, low income students will have a very hard time to be a productive member of society and will in turn affect the overall economy of the country in the long run.