Getting Schooled

Are massive student loans restraining economic growth?

That’s what a new study by the New York Fed seems to show. College loans have grown dramatically in the past few years. Some 43% of adults under 25 now have student debt, up from 25% a decade ago. And the average debt–$20 thousand—is double what it was.

That seems to be getting in the way of other kinds of borrowing, now. It used to be that folks with college loans were more likely to have mortgages than those without; ditto for car loans. But that state has reversed. Either borrowers are running into their own limitations, or the banks are just saying no. That’s quite possible. The same study shows that the average credit score for student-loan borrowers has diverged dramatically from non-borrowers. Those without student debt have much better scores.

Everyone knows that college costs are getting crazy. Now that craziness may come back to bite all of us. For years young, highly-skilled workers have been a vital source of new, affluent consumers. With the explosion of students going into debt to pay for college, those days may be over.

Douglas R. Tengdin, CFA

Chief Investment Officer

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By | 2013-04-19T09:03:18+00:00 April 19th, 2013|Global Market Update|0 Comments

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