Student Debt Microeconomics
Is Student Loan Debt Crippling Local Economies?
Research suggests that increased student loan debt is creating a negative, ripple effect on local economies, because graduates are starting families later, buying homes later, and are repaying loan debt with their professional earnings rather than spending back into their local economy.
About half of all students (49%) graduate college with a total debt count of over 30,000 dollars in student loan debt alone. When you add all this debt together, college graduates and students have a total combined debt of approximately 1.2 trillion dollars. With that much money at hand you have to wonder how these students can manage to buy a house, car, or start a family once they have graduated and pursued …show more content…
Ambrose a professor of risk management Pennsylvania State University titles "Debt capacity" in which he states ""When students use up their debt capacity on student loans, they can’t commit it elsewhere”. For an entrepreneur to pursue setting up a small business, they need to have the ability to provide a solid financial background, free of debt which will allow them to secure a business loan.
With student loan debt, often incurring interest during the time the graduate is still in school, the debt can be so overwhelming that it interferes with being able to afford daily living expenses, thus pushing the loan payments to the back-burner. Although this is becoming an all too common practice, it is exaggerated with student loan debt because unlike other debts, student loans cannot be discharged via …show more content…
The Federal Reserve Bank of Philadelphia also states that, "Small businesses are the backbone of the U.S. economy and account for approximately one-half of the private-sector economy and 99% of all businesses. To start a small business, individuals need access to capital. Given the importance of an entrepreneur’s personal debt capacity in financing a startup business, student loan debt, which is difficult to discharge via bankruptcy, can have lasting effects and may have an impact on the ability of future small business owners to raise capital.” This further demonstrates that ruining the future of our country's next generation to create and maintain small business has a ripple effect on the economic value of our future. If the next generation isn't able to create and maintain the 60% of small business jobs, the economic value of America is due to fall to monopolization and consequently a further loss of the middle class (the foundation) of the American populous. Looney and Yannelis find, “[These students] borrowed substantial amounts to attend institutions with low completion rates and, after enrollment, experienced poor labor market outcomes that made their debt burdens difficult to sustain”. More than 25
Research suggests that increased student loan debt is creating a negative, ripple effect on local economies, because graduates are starting families later, buying homes later, and are repaying loan debt with their professional earnings rather than spending back into their local economy.
About half of all students (49%) graduate college with a total debt count of over 30,000 dollars in student loan debt alone. When you add all this debt together, college graduates and students have a total combined debt of approximately 1.2 trillion dollars. With that much money at hand you have to wonder how these students can manage to buy a house, car, or start a family once they have graduated and pursued …show more content…
Ambrose a professor of risk management Pennsylvania State University titles "Debt capacity" in which he states ""When students use up their debt capacity on student loans, they can’t commit it elsewhere”. For an entrepreneur to pursue setting up a small business, they need to have the ability to provide a solid financial background, free of debt which will allow them to secure a business loan.
With student loan debt, often incurring interest during the time the graduate is still in school, the debt can be so overwhelming that it interferes with being able to afford daily living expenses, thus pushing the loan payments to the back-burner. Although this is becoming an all too common practice, it is exaggerated with student loan debt because unlike other debts, student loans cannot be discharged via …show more content…
The Federal Reserve Bank of Philadelphia also states that, "Small businesses are the backbone of the U.S. economy and account for approximately one-half of the private-sector economy and 99% of all businesses. To start a small business, individuals need access to capital. Given the importance of an entrepreneur’s personal debt capacity in financing a startup business, student loan debt, which is difficult to discharge via bankruptcy, can have lasting effects and may have an impact on the ability of future small business owners to raise capital.” This further demonstrates that ruining the future of our country's next generation to create and maintain small business has a ripple effect on the economic value of our future. If the next generation isn't able to create and maintain the 60% of small business jobs, the economic value of America is due to fall to monopolization and consequently a further loss of the middle class (the foundation) of the American populous. Looney and Yannelis find, “[These students] borrowed substantial amounts to attend institutions with low completion rates and, after enrollment, experienced poor labor market outcomes that made their debt burdens difficult to sustain”. More than 25