Five Ways Student Loans Are Ruining Our Economy and Culture

Five Ways Student Loans Are Ruining Our Economy and Culture

“A July report of the Federal Reserve Bank of Philadelphia finds that student loans have increased tenfold since 1999.”

As the fall semester begins, students are attending classes and incurring great debt.

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A July report of the Federal Reserve Bank of Philadelphia finds that student loans have increased tenfold since 1999. Even worse is the acceleration of this debt over the last eight years. Since 2007, loans doubled from $537 billion to more than $1 trillion today.

The ballooning of student loans is fueled by the idea that everyone should go to college. The problem is that most students have to go to the bank before going to college. Many students secure loans even though they are not sure what they want to study. Others just go because everyone else is going. Universities have responded to growing credit demand by making loans easy to secure.

The Philadelphia Fed’s report now says this policy is misguided. The surge of students on loans is not helping the economy, but ruining it.

1. Starting Life With a Handicap

The first reason why this policy does not work is because students on loans leave college with an average of $28,000 in debt. This weighs them down exactly during the time when they need to build resources to establish a family and career.

The problem becomes worse because the debt load comes when the graduate will be earning less because of a lack of experience. The graduate thus enters life as an adult with a severe handicap that dampens demand and initiative so necessary to a healthy economy.

2. Jobs Without a Future


“Student loans are also responsible for a decreasing number of young entrepreneurs in start-up businesses.”

The second reason why student loans are ruining the economy? They discourage graduates from taking risks and initiatives that help economies. Usually young people are full of energy and ideas which can be a great stimulus for an economy.

Now risk adverse graduates laden with debt are flocking to existing companies to find “safe” jobs to pay off their burdens. They often accept jobs that have no relation to the degree they paid so much to obtain.

3. The Illusion of a Degree

Another reason is that the practice is not living up to the promises of success. Student loans often ruin the possibility of benefiting from a degree. It is now becoming increasingly clear that a university degree is not an instant ticket to success that promises higher lifetime earnings and better well being.

In fact, the Philadelphia Fed’s report finds that many students would be better off without a degree especially among those 17% that are delinquent in their debt payments.

4. Fewer Young Entrepreneurs

Student loans are also responsible for a decreasing number of young entrepreneurs in start-up businesses. The graduate with loans has neither the money nor credit with which to start a business. As a result, young people are not becoming entrepreneurs and the number of small businesses, which make up half of the nation’s economy, is declining.

The Kauffman Foundation, for example, has found that the number of new entrepreneurs between the ages of 20 to 34 fell to 23% of all new start-ups in 2013. The number is down from 35% in 1996. Such a decline could have grave consequences in the future.

5. Time Bomb

Finally, student loans are increasingly going unpaid. Default on loans is a trillion dollar time bomb just waiting to explode with horrific consequences for our economy.

Some want to present taxpayer subsidized student loans as a way of building the nation’sfree subscription future. However, it is fast becoming clear that it not only hurts the students who often carry their debt for decades but it also burdens the taxpayer who is left to pay the bill. All this pulls down the economy and discourages growth. Should the bubble burst, it could trigger an economic crisis.

Student loans are supposed to guarantee success and bolster today’s hobbling economic “recovery.” Instead, these loans are contributing to the problem they were supposed to solve.

Moreover, it is creating a culture of entitlement and irresponsibility. One has to ask: What ever happened to the days when students only went to college when they knew what they were going to become and had the money to pay for it?

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  • Thomas Murawski

    It appears as if this article has missed many of the other ways that student loans are ruining our culture. Examples include young adults not being able to start families until later in life, not being able to purchase a house until later in life, and living at home “in their parents’ basement” rather than becoming independent.

    • Cole

      the article says “This weighs them down exactly during the time when they need to build resources to establish a family and career.”

  • I agree with you, Mr. Murawski. Here’s another big one. Many students require their parents as co-signers on those student loans. So then when the student cannot find a good-paying job, their folks are left with paying the bill. It’s almost impossible these days to save up enough to functionally retire without taking on a post-retirement job as Walmart greeter, so the additional school debt becomes a terrible burden. What’s worse is that this burden also becomes a wedge between parent and child. As if we didn’t already have enough forces acting against the family unit in this country.

  • Beth

    I understand your point, but as a mother of two present college students, how can they afford the high expense to pursue a career without the getting a student loan? For most of us its a necessary burden that we have to take. I do believe, its important that before taking one, we as parents have to guide our kids into choosing a major that will be able to maintain them and be worth the amount of money borrowed. I also believe we have to realize if our kid is college material and to make sure they understand that taking any debt is a big reponsability that has to be paid off before any other superflous expense. I was raised to believe education is the most important tool anybody can have.I have raised my daughters to understand that my husband and I might not be able to leave any big inheritance, but their education and to make the most out of it.
    So, taking a student loan is not the ideal situation, but if I had to do it again, for the sake of my daughters education, I would.

  • LifelongCamper

    SSSSOOOOOOO TRUUUUUUE! Our children who went to college are not “using” their degree, do not have their own home, are not married. One is living with us (Mom and Dad) and the other is renting. Our child who did not go to college has his own growing business, is married with children and is in the paperwork process of buying a home and earns more that the college grads..

  • SovereignAmerican

    Flashback: as for me, I worked every summer just to make enough to go to a Catholic college in my city. My majors were chemistry and math in a “liberal” arts setting. But something happened; I realized I wasn’t being taught how to be a critical thinker (fortunately, I already was) but to parrot ideologies. After two years I left to pursue tech schooling which lead to my career of 30 years.

    But then “Megaforce”, globalization, and multi-culti (diversity) became the norm (no critical thinking allowed) and the American dream, as we boomers knew it, began to collapse. Welcome to the future!

    “Single acts of tyranny may be ascribed to the accidental opinion of a day; but a series of oppressions, begun at a distinguished period and pursued unalterably through every change of ministers, too plainly prove a deliberate, systematic plan of reducing [a people] to slavery.” –Thomas Jefferson: Rights of British America, 1774.

    Stop, Drop, and Roll won’t work in Hell.

  • Let us pray for a return to true Catholicity in our homes, our Catholic schools and our Catholic dioceses for many of our homes, schools and dioceses have lost their ways by drifting to the ‘things of the world’ instead of the ‘things of heaven.’

  • Lukas Lumbantobing

    Perhaps student loan should be abolished or in countries with no such program, to not considering activating it. Agree? Greetings from Indonesia