Student Debt is Dragging Down Economy: News of the Day

Student debt is not merely a burden to those owing it, but it has also become a drain on the economy. Home- and vehicle ownership rates for younger Americans with student loans are lower than those who are free of student debt, according to a new study from the Federal Reserve Bank of New York. Brad Plumer of The Washington Post points out that over the last decade, student debt has grown dramatically and is replacing other types of borrowing - specifically mortgages and auto loans - among 25-to-30-year-olds. The trend has significant implications for the U.S. economy:

Auto and housing sales have been a huge driver of growth these past few years, though auto sales are still well below their peak. (Analysts are expecting around 15 to 15.5 million sales in 2013, versus an average of 16.6 million per year during the 2000s.) If younger Americans are retreating from those markets, that could help slow down the recovery.

This research demonstrates that Congress needs to act to prevent student loan interest rates from doubling, from 3.4 to 6.8 percent on July 1. Continued federal investment in financial aid programs, which helps to reduce college cost and student debt, is key to enriching not only individual economic success, but national prosperity, as well.

Congress extended the 3.4 percent rate last year through the 2012-13 academic year, where it is set to double again to 6.8 percent this summer. For each year Congress does not act, the neediest students will see their costs increase by over $1,000 through repayment. Congress should be helping to keep college affordable, not making it more expensive for student loan borrowers to pay for college. While student loans will be one component of the upcoming Higher Education Act (HEA) reauthorization, students and families cannot wait until 2014. Committee Democrats believe that in the short-term, while the economic recovery remains fragile, we must make sure student loan interest rates do not double on students this summer.

For more information on Congressional Democrats' efforts to maintain college affordability and accessibility, click here.