We’ve got three reasons that the amount of student loans America has outstanding negatively impacts our economy.

You may have wondered why they’ve called it the student loan crisis. It is more than the fact that there is $1.3 trillion in debt and over 43 million Americans sharing that debt. It’s more than that. It bleeds over into other issues. For example, the American economy. We’ve got three reasons that the amount of student loans America has outstanding negatively impacts the economy.

  1. Reduces Spending

There are a few reasons someone may choose not to spend. Student loan borrowers may be taking their extra money and putting it away in savings. Others just can’t afford to spend the money on items that they want to purchase.

The economy is up when people are spending. If we don’t spend the economy goes down. This holiday season as with others should stimulate our economy a little. But with student loan debt at $1.3 trillion and well over 40 million borrowers, we could see a down year. In general, the more debt borrowers have and the more borrowers there are, in general, the less spending we will have.

 

  1. Borrowers Can’t Start Businesses

We’ve covered millennials inability to start new businesses in today’s climate. New businesses help economic growth but we see that starting businesses are taking a backseat to finding a nice corporate job. More businesses mean there are more places to spend your dollar which powers the economy. Unfortunately, borrowers who still want to open a business out of college will still find trouble. Getting approved for a business loan when you’re already in debt is harder to pull off.

 

  1. Student Borrowers Can’t Buy Houses

If there are fewer homebuyers on the market then the prices of homes stagnate – which will be reflected back on the economy. If there are no buyers on the market then fewer homeowners will try and build equity in their home. Student loans have been known to delay borrowers from purchasing a home. Furthermore, since buying homes are related to the mortgage market it’s a multi-tiered negative impact on the economy. Since, if fewer people are buying homes fewer people are likely to take out mortgage loans.