Total outstanding student loan debt has hit record levels, recently topping $1 trillion. This can translate into a heavy financial burden on young graduates, which in turn has a big impact on the economy. The Progressive Policy Institute calculates that people under the age of 30 are spending $43.5 billion every year paying back student loans, which is about 7 percent of their total annual income.
What else could that money go to besides student loans? PPI added up the numbers to find out:
The burden from student debt has been growing: the Federal Reserve found that the number of borrowers and the average amount of debt per borrower has risen by 70 percent since 2004.
The number of new homes that graduates could buy instead of paying back their loans is particularly striking given that homeownership rates have cratered for Americans under 40. This is partly due to the fact that their income has to go to paying down debt and therefore can’t be spent on buying a new house. It also means that they often have a high debt-to-income ratio and lack the money for a large down payment, excluding them from taking out many mortgages.