Question

In what way might rising student-loan debt be a burden on the economy - that is, restrict future economic growth? Do you agree that the wisdom of taking on student-loan debt depends crucially on the likelihood of your actually earning a degree, and if so why is this the case?

Answer 1

In following ways, rising student debt would affect economy:

• Rising student debt, results into reduced spending. Fall in spending on goods and services is not good for economy. Student debt is around $ 1.3 trillion and more than 44 million Americans have student loan. Hence, it affects aggregate demand negatively.
• Rise in student debt reduces demand for houses as well. Property prices fall and economy is negatively affected.
• Further students with debt cannot go for starting new businesses.

Do you agree that the wisdom of taking on student-loan debt depends crucially on the likelihood of your actually earning a degree, and if so why is this the case?

• Student loan becomes problem only if students do not earn degree and fail to get decent job. According to many studies carried out, rise in student loans should not be a matter of worry. Investment in education leads to the rise in the productivity in long run and income of students rise. Further, overall GDP in long run would also experience growth.