According to a recent Moody’s report, student debt in America has risen by around 53% in the past seven years.
This rapid exponential increase has pushed the student loan debt in the United States to just over $1 trillion.
This figure, researchers say, will likely grow even more.
As demonstrated by the graph above, this issue has been exponentially growing for years now, and yet we haven’t even scratched the surface on how to solve it.
Analysts have been gathering some very intriguing opinions on this matter and how it will affect the economy at large.
It might be a prevailing belief that new graduates shoulder the most student debt, but this is false.
[tweet_box design=”default” float=”none”]
It is graduated students ranging from early to late 30’s that have the most student debt.
[/tweet_box]
This is mainly due to the high interest rates that most students find themselves trapped in.
When a student takes out a loan, they are asking to borrow a certain amount.
This can be acquired through a school or a private bank.
However, depending on the type of loan that you take out, there can be steep interest rates attached to that amount of money that they borrowed.
After the students graduate, they have to pay back what they borrowed, plus the ever increasing interest that is attached to that original amount of money.
It is because of this that most graduate students get caught up in student loan debt.
Analysts have recognized this trend of exponential student loan growth, and they have formed a fascinating and a worrying hypothesis on this standard issue.
“It’s hard to detect which areas in the retail portion of the economy will take the most extreme blow as the number of graduates taking out loans continues to be on the rise. It is having an incredibly negative impact on graduates’ newly earned salaries.” Said a Moody’s retail analyst. “We’ve observed what types of businesses are safe, and those are the stores that offer the cheapest products, such as nickel and dime shops.”
With this small quote, O’Shea is making the conjecture that the rising student debt will have a very negative impact on certain areas of our economy, more specifically the retail sector.
Analysts also found that the relationship between the increases in student debt versus the increase in graduates’ wages is worrisome.
They found that in the same period, student debt grew by 53% while graduate income only rose by 3%.
This in-congruent relationship between increased salaries and the amount of money graduates owe is taking a huge hit on these students’ spending cash.
This claim can be expressed in the above graph.
It is easy to see the gap in average student debt versus the mean salary of a recently graduated student.
In the years 2010 through 2012, it can be observed that these students were making less than the baseline that analysts had created.
This only contributes to the amount of student debt that is piling up.
Not only do these students have to pay off the original amount they borrowed, but they also have the mounting interest to pay off as well.
The more this ceiling continues to rise, the greater the impact it will have on the retail sector.
Unless we start doing something, one cannot counteract all of this student loan debt.
The percentage of students not paying their monthly mortgage payment is at an all-time high in the consumer debt area, according to the data.
The weight of student debt weighs so heavily on the backs of recently graduated students that most students choose to move back in with their parent or guardian after they graduate instead on living on their own.
This is because students aren’t making enough to live on their own, and pay off their student debt as well.
“If one calculated the annual payment on all of these student loans, they would find that the payment would be in the millions. This spells trouble for many small businesses and other retail stores.” O’Shea said.
If recently graduated students are spending all of their money on paying off student debt, they are less likely to go and spend money elsewhere.
Student debt is an issue that everyone should be thinking about, as it affects a lot of people.
Not only does this financial burden weigh down on the shoulders of recently graduated young men and women, but it can also affect the economy drastically and therefore more people than just the graduates themselves.
Leave a Reply