Within the recent decades, the issue of student debt emerged as the one that tremendously impacts the US economy. The increasing capacity of educational loans has denied the many graduated to attain CFO status and contribute to the nation’s economy in the appropriate manner.
Student loans are very rampant in America at the moment rendering students helpless as they Join the economy with a lot of debt to pay. The given trend is connected with individual pecuniary implications and socialistic consequences influencing different spheres of the economy.
The financial strain on graduates
The first and probably the most obvious consequence of student debt is that it puts pressure on young professionals in terms of money. The citizens with thousands of dollars in the expectations of loan repayments become the worst off new graduates.
They are also made to postpone many crucial life transactions like the purchase of a house, decision to have children, and financing for additional education. This delay has a domino effect on the overall economy in terms of job creation for the large number of population.
Hence, when individuals delay activities of this nature, it results to a reduced expenditure by the consumers, which is a key boost to the economy. The non-privilege to engage in such vital economic undertakings is unproductive and hinders the growth of the country’s economy.
Furthermore, dealing with debts imposes stress on people, and stress negatively affects their wellbeing which in turn creates a negative impact on job market. This leads to a vicious cycle of experiencing financial pressure and thus contributing less in the economy and becoming a burden both to the self as well as to the society.
The housing market
This is arguably the most affected housing market given that students are usually OFW’s biggest market. Buyers are left on the sidelines because they cannot get financing in the form of a home loan. It is easier for a lender not to give credit facilities to individuals who already owe lots of money for education.
This in a way locks out many in the population from being able to engage in home buying hence lowering the demand and thus slow down on growth of this part of the economy. Owning a house has always been the American dream of accumulating wealth and this disruption therefore has long-term consequences on wealth accumulation.
The job market and career choices
Another area whereby student debts have a strong impact is in the decisions a graduate makes concerning his or her job. Employment in higher paying jobs is compelled in order to repay the loans and this often does not match ones degrees. This, in turn can cause job dissatisfaction and thus will decrease the overall productivity of the organization.
Graduates may also avoid setting up their own businesses or take menial jobs which are unappreciated but play a major role in the development of society for example through teach- ing or working for non-governmental organizations.
The end product is a workforce that is mismatched to the needs/requirements of the business and the operations, which leads to inefficiencies and stagnation especially in strategic industries.
The choices in careers that borrowers are forced to make due to loan repayments are also damaging to innovation and risk-taking which are crucial factors in any recognized economy. Moreover, such constraints hamper entrepreneurism, which has always been a major force behind the growth of America’s economy.
Long-term economic consequences
Through a critical analysis of the source the audience is made to understand that the student debt problem does not only have immediate consequences on the existing economic situations but also poses long term effects. The sum of debts owned by millions of Americans can be toxic to those people and the financial status of future generations.
The implication of such generational debt burden is on the macro economic structure as consumption and investment, which help boost up the economy are constrained. This means that as older generation retain debt for longer periods in their life, their capacity to retire and fund economic rejuvenation is affected.
In addition, the long-term effects of education loans also oblige the students towards long-term repayment schedules which hampers the improvement of income inequality.
Low income graduates may experience greater difficulties than their counterparts from affluent families, hence the continuation of a culture of poverty in the many locations across the nation.