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High US student debt aids GDP overall but raises risks

Monday, June 17, 2019

Subject

Economics implications of US student debt.

Significance

Student loan debt is the largest category of outstanding US consumer debt after mortgages, totaling almost 1.5 trillion dollars -- nearly twice the amount of credit card debt -- and it weighs on the minds and bank accounts of many US citizens. Anecdotal evidence abounds that hefty student debts are crushing the millennial generation (born between the early 1980s and mid-1990s) by preventing them from accumulating wealth and causing them to delay milestones including marriage and home ownership.

Impacts

  • Student debt repayments do not seem to crowd out consumption but may encourage indebtedness if people take on more debt to sustain spending.
  • As well as delaying household formation, student debt may delay young adults' saving for retirement, signposting problems decades ahead.
  • Lifelong learning is key to tech and ageing trends, but older students may drop out or default on debt more, multiplying the challenges.
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