Student loans greatly reduce the spending power of millions of young, American consumers. This could be bad news for all markets across the country.
According to this article, a real estate consulting study says that student debt is getting in the way of the housing market recovering. The study concluded that student loan payments will cost the housing industry $83 billion this year in sales transactions that won’t happen. The article goes on to say that the housing market isn’t hit any harder than any other market by student loans.
Though it might not make much sense to make such a fuss over the housing industry in particular, the article brings up a valid point. With millions of Americans owing tens of thousands of dollars in student loans, the overall spending power of American consumers is weakened, which equates to less money that other markets are making from their customers.
Inflation could make the situation much worse. As costs for education rise, students will probably have to borrow more. Meanwhile, costs for everything else will rise as well, which means that newer graduates will have even less money they can afford to spend outside of paying off their loans; overall spending power goes down even more. Theoretically, this could be solved by lowering student loan payments and extending the repayment period, but how far can that go before it gets to people not being able to pay off their loans before they pass away?
A college education is a very worthwhile investment; even though you’ll likely come out with five-figures to pay off, you’ll be better equipped to do so as college graduates generally make more money than non-college graduates. But problems will arise for individuals and the economy as a whole when people can’t afford to pay for anything else.