Congress and the President made a deal this summer to rein in student loan interest rates for another year, but what's the impact on families and businesses of that revenue being diverted from the consumer, retail or housing sectors, for example?
A study released Thursday by the Institute for One Wisconsin, Madison, offers a comprehensive set of jaw-dropping answers:
Madison -- As student loan debt tops one trillion dollars nationally, surpassing credit card debt, federal officials are pointing to the debt crisis as a drag on economic recovery efforts. Original research from the Institute for One Wisconsin released today confirms the detrimental economic impact of student loan debt, finding it reduces new car purchasing in Wisconsin by over $200 million annually and that middle class households with student loan debt are overwhelmingly more likely to rent than own a home.(Disclosure: I am a member of the Institute Board.)
The Journal Sentinel, combining the Institute study and separate data, said in a Thursday story that the effects on the overall economy were extensive and expanding:
One in five American households now owes money on student loans - more than double the percentage of households and nearly triple the average amount of college debt of two decades ago.
- Individuals with bachelors degrees reported making an average monthly student loan payments of $350 and those with graduate or professional degrees made an average payment of $448;
- The length of student loan debt was nearly 19 years for persons with bachelors degrees and over 22 years for those with graduate or professional degrees;
- An increasing reliance on private student loans versus government loans and an increasing number of individuals consolidating their loans, therefore extending the repayment period and total amount paid, post-1996 Student Loan Marketing Association Reorganization Act;
- Individuals paying on a student loan are more than twice as likely to purchase a used versus new automobile;
- Annual aggregate new vehicle spending may be reduced in Wisconsin by up to $201.8 million;
- A strong correlation between student loan debt and renting with 85.6% of renters with household incomes between $50,000 and $75,000 currently paying on a student loan.