In My Opinion

Ana Veciana-Suarez: Student loan debt is Millenials’ biggest economic threat

 

aveciana@MiamiHerald.com

Those of us who have managed to see our children graduate from college without student loans should consider ourselves as lucky as a Powerball jackpot winner. We’ve given the next generation the best present ever: a debt-free launch into adulthood.

About 40 million Americans are not so fortunate. Many of our best and our brightest are burdened by loan payments that are slowly bleeding them at a time when they should be establishing the kind of strong financial foundation that we, their parents, were busily building at the same age.

Mention student loans, as the news media have consistently done this week, and I think of the young lady in public relations who confided she owed more than twice her annual salary in student loans. Or the newly minted lawyer who expects to be paying down college debt well into middle age. Or the couple forced to live with her parents as they dig out of a six-figure financial millstone.

Almost 60 percent of the 20 million Americans who attend college each year borrow to help cover costs, according to The Chronicle of Higher Education. Estimates put that debt at an all-time high of $1.1 trillion, larger than the onetime bogeyman of credit card debt. During the first quarter of this year alone, student debt increased by $31 billion, and that’s 12 percent higher than a year ago. No wonder experts are calling this the next economic bubble.

And while it’s encouraging that people are willing to invest in their future — college grads out-earn those without a sheepskin — student debt is a drag on other parts of our economy, a not-insignificant detail that should concern everyone, not just students and their parents. If you owe tens of thousands of dollars, you’re less likely to purchase a car, buy a house, invest in the stock market, save for retirement, get married, start a family — all pistons in the engine of our economy.

This partly explains why, two years out of college, half of graduates in a just-released survey are relying on their parents or other family members for some form of financial help, according to research from the University of Arizona. Even among those who have full-time jobs, many still rely on their families for some form of support.

Earlier this week, President Barack Obama announced a plan to help more graduates pay down student debt by expanding an existing loan-repayment program. The new plan will allow people who took out loans before October 2007 to reduce the amount they pay by capping repayments at 10 percent of their income.

Only 10 percent of student loan borrowers, however, qualify for this expansion. Most graduates yoked by student debt, especially those with loans from the private sector, are left with few options.

Tackling the biggest economic threat facing the millennials demands better public policy than what Obama has offered. It will require compromise in Congress — perhaps closing tax loopholes for the wealthy to finance cheaper loan rates — and strict cost control at campuses.

It will also require support at the state level — legislatures investing in public universities, not cutting their budgets — and more students recognizing that certain professions, no matter how noble, cannot be financed with untenable loans. I meet too many graduates whose long-term salary potential will never justify the debt they accrue in college.

We all seem to agree that an educated workforce is required to stay globally competitive. But what good are college graduates who can’t afford the most basic essentials that spell financial independence?

Read more Lifestyle stories from the Miami Herald

  • Condo line: Substantial surplus funds in operating budget not necessarily a good thing

    Q. I live in a homeowners association that has a yearly operating budget of over $200,000. Currently, we have surplus funds in the operating budget of close to $150,000. This is money that was budgeted for maintenance over the past six or seven years but not spent, and has just been piling up.

  • Southern Cross Stargazer for Aug. 24-30, 2014

    By nightfall, eastbound Mars slides 3.3 degrees below westbound silver Saturn in Libra in the west. Huge Scorpius crawls across the south. Antares, a red supergiant, is the heart beating in the Scorpion’s torso.

  • Around Florida

    Civil War reenactments planned around state

    Florida did not play a major role in America’s Civil War. Only two large-scale battles were fought here, but a number of smaller skirmishes and raids took place in the state, as its long coastline made it strategically important to both sides.

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category