Another
day, and another awful consequence of our student debt problem has come to
light. The New York Fed just released
data showing that growing levels of student debt have impacted
homeownership and car purchasing patterns. In the past, 30-year-olds who at
some point owed student debt were more likely than those who didn’t to take out
loans on new homes, since more education is correlated with higher incomes.
However, declining economic fortunes caused by Great Recession has changed all
that: 30-year-olds without student debt are now more likely to take out loans
to finance a new home. Likewise, though borrowers of student debt were once
more likely than non-borrowers to take out a loan for a car, the situation is
now reversed. More than any other factor, then, we can credit the Great
Recession with opening our eyes to the consequences of mounting student debt.
However, it remains to be seen whether these revelations will lead to
reform.
The Fed’s report contains perhaps the strongest argument for student loan reform. Indeed, borrowers of student debt are increasingly unable to finance the
purchases that will lead them to adulthood. Moreover, given that a strong
housing market is essential to our economy’s continued health, this report
suggests that the student debt burden might delay our economic recovery. Many
have already argued
that student debt will have such ripple effects, and this report adds another
data point in their favor.
