The World in Pictures {07.19.17}

Here is the negative side of the student loan argument from Rick Rieder, Global Chief Investment Officer of Fixed Income, Blackrock:

"This {student loan} crisis has under-appreciated negative side effects for the US economy as a whole. Most significantly, student loans are making it harder for first-time home buyers to afford their own home, with more than 70% of would-be first-time buyers saying student loan debt is delaying their home purchase, according to the National Association of Realtors. As a result, the homeownership rate in the US has fallen each of the last six years despite a solid economic recovery, according to the US Census Bureau, with the biggest impact coming from the 25-34 year old cohort as seen in the chart above. 

The student loan burden is not just curtailing young adults’ home buying; it is weakening their consumption in general, posing a major headwind to US economic growth. In addition to the direct economic impact, the student loan crisis could also worsen the class divide. Home ownership levels at age 30 are much lower among those with college debt than those without, and when faced with today’s high college costs coupled with the prospect of taking on significant debt, more students from lower-income households may choose not to attend college, worsening their outlook for employment and wage income over the course of their career. The bottomline: This crisis is likely to be a major drag on the US economy for years to come if it remains unaddressed, and an elegant fiscal-policy solution is needed, the sooner the better."

My comment:  I agree on part of this argument in that the over one trillion dollars of student loan debt that is being paid back is money that isn't being spent somewhere else.  I'm not sure it's actually a crisis yet due to the amount of debt the average student carries {around $30,000}.   Millennials having yet been buying homes but I suspect that's about to change as they enter their prime child rearing years.  Also, I think some of the student loan burden could be issued if the interest rates they were being charged were lowered.  I find the argument that students should be charged over six percent on debt that they for the most part can't discharge in bankruptcy hard to swallow.  Index that rate to something like 50 basis points over the 10-year treasury and I think you'd see a pick-up in economic spending and growth.


Link:  Businessinsider.com The Most Important Charts In the World From the Brightest Minds on Wall Street.