Student Loans and Stunted Growth

Written By Ryan Stancil

Posted June 5, 2014

All over the country, bright-eyed college students are donning their robes, accepting their diplomas, and preparing to move on to the next phase in life.

But after the commencement speeches, walks across the stages, and pictures with friends and family, reality sets in.

For those students who are graduating, it took years to reach this point. In all likelihood, it’s going to take years to pay off the student loans that have built up in that time.

And the time spent paying back those loans means the economy is going to take that much longer to recover.

Expensive Loans, Low Wages, and Sluggish Growth: A Domino Effect

It’s no secret that the amount of the average student loan debt has been climbing over the past few years, but you may be shocked to learn that number has recently crept north of $30,000. Even so, it isn’t unheard of for outstanding loan balances to be much higher than that even before you factor in the interest.

But those students will be able to get jobs and pay it all back, right?

Probably not.

Recently released data shows that not only are more student loans going into default every year, but the total outstanding debt has exceeded $1 trillion. That means it eclipses credit card debt and comes in second only to mortgages.

A lot of this has to do with the fact that students are grappling with rising tuition costs and entering a stagnant job market with stagnant wages. If this problem isn’t at crisis levels yet, it won’t be long before we get there. The student loan issue is only one symptom that our ailing economy is showing, but it’s a big one.

As you know, America is largely a consumer economy. We need people to make big purchases like cars and houses for our GDP to go up, but that isn’t going to happen on the scale we need when those just entering the workforce can barely pay their bills, never mind repay the loans they took out to go to school.

As time goes on, this group of people is only going to grow in size. And the fact that they aren’t buying the things by which the United States gauges the strength of its economy is going to become much harder to ignore or downplay.

Before you know it, companies that produce the goods we buy will be turning more attention toward other countries to turn a profit and the influence of a dollar here at home will continue to decline.

Is the Leadership Sitting on Its Hands?

You’d think the country’s leadership would be putting forth some effort to do something about it, but only a few seem interested in addressing the issue. Any proposals being put forth are still a ways out if they have any chance of materializing at all.

Maybe the establishment is slow to act because it makes money off of student loans.

Maybe it can’t act because it’s too busy making sure the rich and powerful are well taken care of.

These are just two of many reasons why this problem will continue to grow over the next few years with no solution in sight.

And while those reasons might be different, you can be sure we’ll face the same dire consequences if this issue continues to go unchecked: stalled growth, weaker economic standing compared to the rest of the world, and a population that’s only going to grow increasingly frustrated as the country continues to march down this path.

Some people are sure it will lead to a crisis similar to what we saw in 2008. Others, like the millions around the country who owe on these loans, face anxiety-inducing uncertainty over what the future holds.

They tried to better themselves by moving forward with their education, but are being held back by the slim prospects they face when trying to move ahead in the real world. One step forward, two steps back.

Either way, it seems like it’s going to get worse before it gets better.

Until next time, 

Ryan Stancil