Rising student debt throughout the nation is not only a burden to individuals who are not making the income to pay off the debt. As the cost of college and university rises, student-loan debt is becoming a drag on the housing market. Where students used to get jobs and purchase homes, they are now living with the burden of loan debt.
Student loan debt is not dischargeable through bankruptcy, in general, but it does fall into a broader debt category that can impact financial well-being. Individuals with significant loan debt are also more likely to have credit card debt and other outstanding debts that may be dischargeable through bankruptcy.
Tuition expenses have risen about three times as fast as wages according to the Labor Department. Income has also gone down. Changes like this in the economy can have a broad social impact on individuals as well as the market. The explosion in student debt also means a lower homeownership rate for young people.
Graduates cannot obtain mortgages at affordable rates because of their debt burdens. In addition to being cash-strapped, those with student loan debt will also mean significant interests payments. Based on an average loan balance of $23,300, debtors paid $1,165 in interest. Not only will these student loan debts inhibit homeownership, they can also prevent young people from moving past other unaffordable debts, including credit card payments and medical expenses.
Bloomberg, "Explosion in Student Debt' Drags Down Housing: Chart of the Day," David Wilson, April 16, 2012.