Student Loan Debt: The College Catch-22
March 30, 2012
Recent findings that student loan debt has topped $1 trillion have raised eyebrows for more than just young people with high monthly payments while suffering in the labor market. Economists, politicians, and pundits alike are forecasting changes in higher-education costs, the recovery of the housing market, unemployment rates, and debt forbearance.
A new report by HIS Global Insight points out that poor job prospects have accelerated college enrollment in recent years. Additionally, rising tuition and other student living costs continue to place pressure on student loan demand.
The increase of debt – students borrowed around $117 billion in federal student loans last year – compounded by unemployment and lower wage job prospects, are forcing young Americans to make difficult decisions that will have a noticeable impact on the economy. The study reiterates concerns raised by the Consumer Financial Protection Bureau last week regarding young people delaying big ticket purchases, such as a new car and first home, as well as holding off on other milestones (e.g., marriage and having children) that bolster consumer spending.
That delay, however, may equate to a surge of spending as young Americans work their way out from student loan debt in the future. When that will happen is fuel for debate.
For now, young adults are faced with a college catch-22. While college degrees may equate to higher salaries and total lifetime income, graduates hoping to reach “the American dream” lifestyle face a new reality—one shaped by debt and a tight labor market.
For information on student cost of living and projected salary data, visit SalaryExpert’s Education Planning Center.