Consumers today are struggling for a variety of different reasons, but one of the biggest culprits limiting the buying power of young people is a crippling amount of student loan debt.
While most teachers and guidance counselors believe that encouraging students to seek degrees from colleges and universities is a good thing, the cost of obtaining those degrees is higher than ever…and in many cases, the return does not justify the price.
In fact, the debt that most students are required to take on in exchange for their college experience will limit their ability to achieve a modest lifestyle for the rest of their lives.
College Debt Statistics
According to a recent article published by Forbes, the total amount of outstanding student loan debt has reached a level north of $1.5 trillion.
The same article noted that the average student loan borrower from the class of 2017 is looking at more than $28,000 in debt. And more than 11% of those borrowers are already falling behind on their payments to service those debts.
Limiting Discretionary Spending
The weight of the debt that comes with a college education today is causing a massive reduction in consumer spending among the young people graduating from colleges and universities.
We used to be able to count on young adults entering the workforce to have plenty of disposable income to spend, but with student loan debt taking up such a large portion of their budgets, those consumers just aren’t spending like they used to.
Limiting Home Sales
Home sales are also suffering on account of the student loan debt crisis. In addition to not having disposable income, young adults are struggling to come up with down payments to purchase homes.
When you combine that with the massive amounts of student loan debt on their personal balance sheets, these consumers are having a difficult time qualifying for mortgages on even the most modest homes.
Compounding With Credit Cards
Unfortunately for many young adults, the grim picture we have painted thus far is just the start of the issues they are facing today. In many cases, those problems are then compounded by an ever-increasing amount of credit card debt.
With student loan payments taking up a large portion of their budgets, many consumers are forced to resort to credit cards to pay for their daily expenses, which we all know can quickly spiral out of control.
One Last Issue
As if all of that wasn’t quite enough, college graduates are also finding out that the jobs they have available to them after school aren’t paying quite as much as they were expecting.
That means that even the most budget-conscious graduates are having to readjust their expectations after receiving their diplomas.
When you combine all of these problems on one personal balance sheet, it is easy to see why many young adults feel like the deck was stacked against them right from the start. And despite the fact that people are starting to realize that this is a serious issue, we are still encouraging young people to borrow money for college.
As the cost of that higher education continues to rise, we are creating a potential bubble that could send us straight into a depression when it bursts.