We recently conducted an informal poll of the social workers we deal with every day and asked them what they thought was the #1 social malady threatening the country today. Their answer might surprise you; more than the opioid epidemic; more than veterans affairs; more than homelessness; more than woman’s rights; more than economic imbalance; more than education issues; more than civil rights; more than the environment; the problem that was cited more than any other was – STUDENT DEBT!

Debt Ridden

At the end of 2018, America owed a total of $870 billion in credit card debt. When other sources of revolving consumer credit are factored in, Americans owe a total of $1.057 trillion as of March 2019.

Student Debt

$1.6 trillion student debt now exceeds total American outstanding consumer debt! That means students and recent graduates now carry a heavier debt burden than all of the country’s everyday consumers combined. That’s astounding!

What Happened?

In the early 1990s, student loan originations (in 2014 inflation-adjusted dollars) totaled around $20 billion. By 2000, these had doubled to a little over $40 billion. By 2010, annual student loan originations exceeded $100 billion. With the government’s guarantee in the mix, no potential student was denied a college education because they couldn’t afford tuition.

Colleges, both brick and mortar and online, were expanding at a breakneck pace, enrolling students as fast as they could. The educational model gave way to a competitive business model and tuition costs went up while admissions standards went down. Before we knew it, the country’s colleges had collected more money than all of the consumer goods companies combined, and our kids had run up $1.6 trillion in debt before they even had gainful employment.

Unexpected Consequences

A recent Washington Post article by business reporter Christopher Ingraham identifies a number of ways this debt overhang—which currently sits at 7.59 percent of annual national income—is harming the country.

1. Delay in marriage: Debt is becoming a barrier to marriage, as many couples first live together so that they can save, pay off debt and then be in a position to afford their preferred wedding.
2. Decline in small business formation: A Federal Reserve study found “a significant and economically meaningful negative correlation between [higher levels of] student loan debt and net business formation."
3. Reduced homeownership: Summarizing data from the Federal Reserve’s Survey of Consumer Finance, Ingraham reports, “Student loan debt prevented about 400,000 young families from purchasing homes, accounting for about a quarter of the drop in home-ownership rates in this demographic from 2005 to 2014.”
4. Family economic instability:  Another Federal Reserve report, this one from 2013, found that student loan debt jeopardizes the short-run financial health of households because there is less room to respond to financial mishap when you’re saddled with debt payments.
5. Depressed retirement savings: Participation rates in 401(k) plans are affected. On average, those with student loan debt contribute half as much to their accounts as those without student debt. 

No Relief in Site

• The median student still owes 80% of their balance 12 years after beginning school.
• The overall default rate on student loans is 28%.
• 114,000 Americans currently have social security payments garnished to collect on student loans.

No Easy Answer

None of the social workers we informally surveyed offered solutions to this astronomical mountain of debt or chose to take sides in the current political debate. Suffice to say that they identify this almost unimaginable student debt overhang as the country’s #1 social issue. What do you think?