How Does Student Loan Debt Affect Students Economic Growth After Graduation?

by Paul Etienne, MBA / Jan 20, 2021

As of now, the total student debt is $1.5 Trillion. That amount is more considerable than the annual income of 175 countries. Some of the countries don't even generate half of the revenue. Almost 10 years ago, the average student had a debt of $17,000, but now this number increased, and as of last year, an average student is under the debt of $30,000. According to research, every 7 out of 10 students has taken student loans. This amount affects the economic growth of the students who are indebted to the state and the country.

Middle-class families are more affected by the student loan system. This wasn't an issue before for the middle-class families, as they were prepared for their children's future and used their savings for the college fees. On the other hand, research has shown that middle-class families are more under debt than lower-class families. When it comes to pay-off the loan, students who belong to middle-class families face more difficulties. Most students who completed college with a loan are already under $30,000 loan before starting their first job.

Unemployment and competition in the market are also the concern for the freshly graduated students to pace up paying off the loan. Students who are recently graduated find it difficult to put themselves in a position to pay off the loan quickly. All these factors stop students from growing their economy, and the country's economy is not stimulating. This debt also puts students under pressure and in the pressure of paying off their loans straight away; students often join the jobs, which are under-paid or under-skilled. This is also an important factor in negative economic growth. This led students to miss the opportunity to avail the other advantages of graduation. Researches have shown that students under debt are 36% less likely to buy their own house. They are also unable to qualify for car loans because of their weak bank statements. These students are mostly living with their parents, even after graduation.
Moreover, the situation worsens when they borrow more money to keep up with the monthly deadlines of the student loan payments. Most of the students studying by taking loans don't complete graduation, which worsens for such students. It makes it harder for such students to earn much money when they don't have a skilled job.

Statistically, if we look at this situation, we will see that the yearly loan that the States is giving the students is more than they are getting back. The student loan program is affecting the country’s economy in this way. For those students who are obtaining student loans, they are in an economic crisis too. If a student’s debt is $30,000 and even if he/she graduates on time and with high grades that student is in debt of $30,000 even before joining the job. If we take out the expenses, still a big part of their salaries will pay off the loan. There is no way that such students are saving some for themselves. If the situation remains the same for such students, then at least for 10 years, there is no hope for them to grow economically unless they pay off their loans. It is difficult for such students even to purchase their own house or even a car unless their debt is paid. For the government, it is not beneficial even if they get back the money from the students. Because getting $30,000 back from a student is not the same as earning $30,000 from a citizen of the country. This is the same cash that you gave the student in the first place, and now you are just replacing it, but if instead of getting the loan back, you are generating the same amount of revenue that would be more beneficial for the government.
Graduation is considered a big step towards one's career because you can get a job according to your college's skills for 4 or 5 years. On the other hand, if you are under the debt of student loans, there is no time for you to make things for yourself. First, you have to pay off this loan, and then you can make some savings for yourself and start purchasing things for yourself. This is how student loan is affecting the students to make economic growth.

Besides, if we look at the solution to this problem, we already know that there are talks of cancelling student loans. President Joe Biden has backed Senator Elizabeth Warren for her initiative to cancel the loan debt for the students partially. If this happens, students will get an opportunity to start right away after their graduation. If students even get a let-off partially from their loans, they will have the opportunity to buy their house and, in this way, the government will also earn in the form of mortgage payments. Financing students who can't afford college fees can also be resolved by donating to charities and foundations that offer scholarships to deserving students.
Student loan payments have been an issue for quite a time now. Students under these loan debts have no time and resources to be independent. The government's potential initiative to cancel the loan debts for such students can lead to economic growth for the students and the country.

If you have student loans that need to be paid then you can start a campaign today with us..