Student Debt and the Economy

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According to a recent piece in Bloomberg News, student debt might be dragging down the housing market.

As David Wilson writes:

As the cost of attending U.S. colleges and universities surges, student-loan debt is turning into “a significant drag on the housing market,” according to Pierre Lapointe, a Brockhouse & Cooper Inc. strategist.

Many former students won’t be able to obtain mortgages at affordable rates because of their debt burdens, the report said. Lapointe estimated that interest payments on student debt amount to $1,165 a year, based on an average balance of $23,300 in last year’s third quarter and a 5 percent interest rate.

It’s not really clear what the direct relationship is, or what the solution might be (housing ownership itself is a form of debt and that debt impacts other parts of the economy) but still, it matters. Having education debt, of any amount, represents money people can’t spend on other things.

In the last decade, according to the piece, average weekly wages have increased 37 percent. College tuition, in contrast, has increased 105 percent. Most of the difference between these two figures has became part of the massive debt load college graduates now hold. [Image via]

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer