Why is Student Loan Debt a Problem?

1 Trillion dollars in student loan debt.  That is such an unfathomable number.  What does that mean to you?  What an unfortunate state of affairs that the workforce of tomorrow is saddled with more student loan debt in the history of the United States.  Why is this so alarming?  Well let’s look at the possible ramifications of more people going in to greater student loan debt.  According to the New York Fed 1 in 4 graduates are behind on their payments

Lagging Real Estate Market

There are three reasons the real estate market could continue to lag.  1. Because most people right out of college aren’t in their peak earing years their debt to income ratio will be high which will make it very diffcult for them to qualify of a home loan.  2. The student loan debt payment alone can make it so that the younger generation can’t afford a mortgage payment.   3. It could be harder to save for a down payment

Limited Financial Relief

Most of the student debt is federally backed which makes it very difficult to have the debt reduced if you have difficulties paying it back.  It pretty much can stay with you to the grave.  Even through bankruptcy it is extremely difficult to get relief.  That is not to say that there is no relief available but it is very limited.

Higher Interest Rates

When you fall behind on your loans you could incur penalties and interest which makes the montly loan payment even highter.

Getting Married

Many young people are waiting to get married and start a family because they are so worried about their student loan debt payments make it difficult to afford a family.

Co-Signed Loans

Even parents are wriled in this mess.  Many parents have co-signed on their childerens student loans which is all and good if their son or daughter can land a good job right out of school.  When they can’t the parents are stuck with the bill.  This added expense can make it difficult to consider retirement for some.

Don’t think that we are saying it doesn’t make sense to go to college.  Far from it.  The income differential between non college graduates and graduates is more pronounced than ever.  Do your due diligence before signing up for those student loans.  Are there jobs available for you when you get out?  What can you expect to get paid?  Will you be able to afford your student loan payments?  How long is it going to take you to pay them off?

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 Don’t Suffer Because of your Student Loans! Retire Debt Free!