Much research has recently revealed that student debt may cause people to make different decisions regarding their educational path than they would otherwise - affecting not only individual lives but also the entire economy. This problem is illustrated by the facts that tuition is going up and overall debts are increasing, all while wages for college graduates continue to be minimal or nonexistant. The combination of the two is worrisome, not only in the financial industry but also in the housing industry, the auto sector, and many other parts of the economy.
In a nutshell, student loan debt impacts an individual's overall debt capacity. Every person has a threshold for how much debt load they can carry based upon their income. Therefore, it is not
surprising that student loan debt also appears to be affecting homeownership trends. Fewer 30-year-olds in general have bought homes since the recession, but the decline has been steeper for people with a history of student loan debt and has continued even as the housing market has recovered. That fact has a very real impact on communities as the tax base for services shrinks with fewer home owners. And the impact doesn't stop there. Student debt carriers are also less likely to buy cars, invest in retirement plans or give to non-profit organizations.
Studies have also found that loan debt can also drive students away from completing college once they have already started. Non-completion rates are higher than one may think. On average 50% of students who begin college will not complete the degree they set out to attain. Students who start college but do not graduate are stuck with loan repayments and no college degree. They still have to repay their loans but do not have the economic boost of a college degree to help them have enough income to cover this cost. Many students defaulting on loans fall into this category of students with debt but no degree.
Part of addressing the student loan debt crisis is realigning how we define success in our economy. The days of thinking success in only attached to a four year degree are gone. There
are many great jobs available in communities which require all levels of degrees or credentials. According to research conducted by Harvard University, the ratio of jobs in our economy is
1:2:7. For every one job that requires a master's degree or higher, two bachelor degrees are needed and more than a half-dozen jobs exist which require high skilled employees possessing a one year technical diploma or associate degree. In almost all instances, the cost of attaining skill-based degrees is much more economical. Students can still chose to transfer to another institution to complete a four year degree if they desire, and often the attainment of that degree will be supported by or paid for by their employer.
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