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NextGen Magazine

 
 

Student Debt, While Still Massive, Growing at Slower Rate Than Before

By:
Chris Gaetano
Published Date:
Oct 8, 2019
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While college graduates still hold a substantial amount of debt, recent data indicates that the rate of growth has slowed by half after a long period of consistent increases, according to CBS. Debt burdens grew at a fairly consistent 4 percent per year between 1996 and 2012. However, since 2017, that growth rate has decreased to about 2 percent, at least as far as public university graduates are concerned. This shift is attributed to increases in state and local funding, which has taken some of the pressure off students. 

While this is an encouraging sign, CBS noted that total outstanding college debt is currently $1.6 trillion, which is so large that it's beginning to warp the economy in other areas. A research paper released by the Federal Reserve in 2016 not only found that rising student debt was impacting home ownership, it also calculated the exact ratio: every 10 percent increase in student loan debt reduces home ownership by 0.1 percentage points among 25- and 26-year olds who had attended college. Another research paper, by the Federal Reserve, found that increases of one standard deviation in student debt reduced the number of businesses with one to four employees by 14 percent on average between 2000 and 2010. 

A paper from the Levy Economic Institute at Bard College said that a one-time policy of student debt cancellation would have a meaningful stimulus effect with only moderate effects on the federal budget, interest rates and inflation.