College Student Loan Debt Is Now A Huge Drag On The U.S. Economy

2010 figures just released by the federal government show that college debt as a percentage of national household debt is growing markedly. At the end of 2010, nearly 1 in 5 U.S. households, or about 22.4 million households, were burdened by an average of $26,000 in college debt. This equates to a staggering $582.4 BILLION in college debt, and the figure is growing as more and more students enter college. And poorer households are burdened more by college debt than the rich, as one would suspect.

It's no wonder the national economy is still struggling. The college debt load is a significant drag. Graduating students with $26,000 or more in debt load aren't going to be rushing out and buying fancy new cars, real estate, and consumer goods, even if they are lucky enough to land middle class jobs. They'll spend years paying off those debts, and deferring large expenditures in the interim.

Since 70% of our nation's economy derives from consumer spending two things must happen, if we are to get back healthy economic and job growth rates: (1) the federal government must bring pressure to bear on colleges to curb costs and thus rising tuition rates and (2) the government must find a way to relieve students of this enormous debt load, so they can retain more of their income and spend much more to help the economy grow.

Point number one could be effected by reducing the dollar amount of individual student loans. While this sounds counterproductive, only increasing student debt, it's really not. Colleges calibrate tuition rates based on student loan amounts available to each student from federal guarantees. In other words, fees rise to match the available loan money. Reduce the loans, and colleges will be forced to reduce tuitions to be competitive, as education consumers (i.e., college students) switch to lower cost colleges (brands).

Point number two could be accomplished in a couple of ways.
The Feds could force the banks to greatly extend the loan periods and the government could even offer student loan forgiveness in return for military or national service. Some would call this a "cloaked draft"; and indeed it would be. The other option is diverting some of the DoD fund savings from the winding down of the Afghan war and planned reductions in our nuclear arsenal to fund reductions in student loan outstanding balances, if good grades are maintained, students graduate in productive and needed fields, etc.

However student loan relief is achieved, it is obvious that this should be a high priority for the Obama Administration, because of its continuing deleterious effect upon the national economy.

Source: http://blog.oregonlive.com/myoregon/2013/02/college_student_loan_debt_is_n.html

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