New National Research Shows Trillion Dollar Student Loan Debt Crisis a ‘Clear and Present Danger’ for Families and American Economy
One Wisconsin Institute National Research Reveals Widespread Debt's Negative Impact on Home and New Vehicle Sales
MADISON, Wis. — With interest rates on federal student loans set to double in mere days due to Congressional inaction, One Wisconsin Institute, a member of the national Progress Now Education Network, today unveiled new survey data showing the devastating impact of the one trillion dollars in student loan debt on the American economy.
One Wisconsin Institute Executive Director Scot Ross commented, “As the cost of college tuition skyrockets, students and their families are saddled with over one trillion dollars in debt. Meanwhile, big banks and the federal government make billions of dollars in profits on the loans. Our original research shows how this vicious cycle is a clear and present danger not just for the finances of students and their families but to our national economy.”
The comprehensive financial survey of over 61,000 Americans revealed significant length of repayment terms and resulting impacts on economic activity:
- An average length of repayment for all those reporting student loan debt of 21 years, ranging from 17 years for those with some college but no degree up to 23 year for debtors with graduate degrees;
- Rates of home ownership were 36% lower among individuals still paying on student loans versus those who have already paid off a loan across all income levels;
- For individuals reporting solid middle class incomes of $50,000 to $75,000, those still paying off their student loans report home ownership rates 28% lower than those in the same income range who have already paid off their loans. In the $75,000 to $100,000 income range loan payers home ownership rates were 25% lower non-payers;
- Across all income levels, individuals who have paid off their student loan are more likely to have purchased a new versus used vehicle in the last 10 years;
- For those currently repaying a student loan, over 63% purchased a used vehicle instead of a new vehicle;
- In a household with a family member repaying a student loan the last vehicle purchased was used for over 71%, versus new for just over 28%;
- The survey data suggests an aggregate impact of $6.4 billion in reduced new vehicle sales annually.
The research is based on response to a nationwide survey sent to a network of not-for-profit membership organizations. Over 61,000 individuals completed the detailed survey of their personal finances including their income and levels of educational attainment, if they had or were paying off a student loan and economic behavior like home and auto purchases.
Ross commented, “These are people who took the responsibility to find a way to pay for their schooling, and, with hard work, earned a higher education. Not only are they now saddled with one trillion in debt, but they have to deal with a system that’s stacked against them.”
Privatization of student loans in the 1990s and early 2000s was coupled with the removal of consumer protections and other measures benefitting lenders. For example, student loans cannot be refinanced, like a home mortgage, to take advantage of lower interest rates.
“Higher education ought to be the path to the middle class, not a sentence to 20 years of debt. Our research findings show that the one trillion dollars in student loan debt currently burdening 37 million Americans is not just a crisis for them, but for our entire economy. The status quo, much less piling on with higher interest rates on federal student loans, is unacceptable,” concluded Ross.
A summary of One Wisconsin Institute’s survey findings can be found at https://drive.google.com/file/d/0B8LurBVUNQZfQVhYZWZvamlfd00.