Could Student Debt Kill the Economic Recovery?

Undergraduate students who are seniors are now down to their last few weeks of college but many are feeling little cause for celebration. Student loan debt has now surpassed $1 trillion, exceeding both credit card and auto loan debt. All told, some 36 million people have to repay debt from student loans — and some are arguing that excessive student debt is endangering the fragile economic recovery.

The Institute for College Access & Success (TICAS), a nonprofit policy research group in Oakland, California, says that students graduating in 2010 had an average of $25,250 in debt. The depressed job market has meant that it’s harder than ever for students to repay their loans: For those starting repayment in 2009, the two-year default rate of all student loans was 8.8 percent, according to Consumer Reports. Even those who are able to pay off their debt (sometimes from loans for both undergraduate and graduate school) have found themselves unable to save for their retirement or buy a first house.

Could the Student Debt Crisis Bring Down the Economy?

It is not only students who have found themselves saddled by debt. A new report by the Federal Reserve Bank of New York says that parents and the federal government are carrying a substantial part of the bill for debt from student loans. An Associated Press story (via EdWeek) found that Americans 60 and older still owe about $36 billion in student loans.

In addition, student loans — like child support and income taxes — cannot be “discharged or reduced in bankruptcy proceedings, as can most other delinquent debt.” William Brewer, president of the National Association of Consumer Bankruptcy Attorneys,says that he has started to see “huge defaults on student loans and people driven into financial difficulties because of them.”

For this reason, some are asking if the student debt loan crisis bring down the financial sector as the mortgage crisis was in danger of doing in 2008. Nigel Gault, chief U.S. economist at IHS Global Insight, does not think so. But as he tells the Associated Press, debts from unpaid student loans do get transferred to taxpayers.

We Need Strategies to Solve the Student Debt Loan Crisis Not Rhetoric

While everyone — certainly graduating seniors — is alarmed about student debt, the crisis hasn’t really seemed to catch the attention of politicians. Mitt Romney, Rick Santorum and the other Republican contenders for the GOP presidential nomination have offered rhetoric — Romney referring to federal loans to students as a “government takeover” and Santorum calling President Obama a “snob” for saying that all Americans should have some form of post-secondary education — but not any substantial solutions.

Obama has announced measures to control runaway student loan debt, including extending the current tuition tax credit, doubling the number of work-study jobs over five years and allowing borrowers to consolidate multiple student loans at reduced interest rates. How much of a dent in students’ loans such measures might make is debatable. Perhaps what we need to take a harder look at is why college tuition is skyrocketing.

Why, for instance, has a community college in California proposed charging more for some popular courses than others, leading to a protest on Tuesday at which students were pepper-sprayed?

Why does it cost so much more to go to college today than ever?


Related Care2 Coverage

Community College Charges Extra For Popular Classes

Students Pepper Sprayed While Protesting Tuition

Why Are The Presidential Hopefuls Ignoring Education?


Photo by Jagz Mario


Eric Lees
Eric Lees5 years ago

This is the result of the government interfering in the market. Prices go up. Same as the housing bubble.

And no Bill, and Troy the government can not bailout the student loans like Wall Street. For one we are broke and that would just make things worse. The wall street banks should not of been rewarded for their gambling, that problem is still lingering in the dark.

Christina R.
Christina R5 years ago

Oh what I could do with all that money I would have if I could cut my student loan debt....*sigh*

Past Member
Past Member 5 years ago

We need more student loan forgiveness. My state promises it if you work in a needy district, but has so many provisions and hoops that almost no one gets even partial forgiveness.

J C Bro
J C Brou5 years ago

yes it can, and its the fault of the banks

LARRY H.5 years ago

Student debt can really hurt the economic recovery. Perhaps it is time for our colleges and universities to find a way to invest in our youth who are the future of our country, instead of trying to get rich off them.

Bill Eagle
Bill Eagle5 years ago

If we can bail out Wallstreet, we should be able to nationally reduce student debt.

Vicky Pitchford
Vicky P5 years ago

Debt usually does

Troy G.
Troy Grant5 years ago

Forgive student loans. If we can bail out Wall Street and banksters, we can bail out students, the future of our country.

Keevin Shultz
Keevin Shultz5 years ago

We ALL have to ban together to help students out. One way to help is the next time you're referred to a surgeon for possible surgery evaluation DEMAND a young doctor fresh out of medical school with at least $200,000 debt. A few extra operations and these guys will be just fine.

Carol Gilster
Carol Gilster5 years ago

When college graduates are so heavily burdened with debt upon graduation that it will take decades to become debt free, and when many young people who could successfully complete college do not go because they cannot pay for it, our nation, our society, will suffer long term because of the loss of contributions both financial and social. And, those individuals will suffer personally for not being able to attain their potential in life.
If society truly were concerned for the wellbeing of our citizens, we would find a way to achieve success for these individuals and, resulting from that, greater achievements for all society.