Student debt has created an economic “crisis” in the U.S., especially when it comes to the housing market, according to one non-profit advocacy group.
“It’s a personal crisis for individuals with debt but it is a crisis for the economy,” Cody Hounanian, a program director at non-profit group Student Debt Crisis, told Hill.TV’s Krystal Ball and Buck Sexton on Tuesday.
“A recent Federal Reserve report proved what we we’ve been saying for years, which is that student debt prevents young people from purchasing homes,” Hounanian continued. “That has been a driver for the economy for years and of course for individuals without that home purchase, it’s much harder to build individual wealth.”
The Federal Reserve in January issued a report that found that college debt is playing a significant role in the decline of home ownership over the past decade, particularly among young people.
According to the report, homeownership dropped 9 percent among millennials ages 24 to 32 between 2005 and 2014. Fed economists estimated that at least one to two percent of that drop is due to the rising levels of student loan debt.
Hounanian, however, warned that the issue is even more troubling than it appears, citing a recent poll conducted by Student Debt Crisis. The Federal Reserve said that student debt has more than doubled over the last 10 years, totaling more than $1.5 trillion.
“We recently polled about 7,000 student loan borrowers and we found that the problem is even worse than we thought,” he told Hill.TV. “These people are on extremely thin ice and are really just getting by at the moment and the problem is only getting worse.”
Hounanian said this trend could potentially create a “time bomb” for an entire generation of Americans.
“We are going to see a time bomb here when an entire generation of borrowers doesn’t have the financial means to make those milestones that we’ve called the American dream for so long,” Hounanian said, adding this could have an impact on everything from starting a family to purchasing a car or a home.
The Trump administration has called on Congress to help address the growing problem, issuing a series of proposals aimed at amending the Higher Education Act.
The latest proposal is aimed at curbing rising college costs by capping how much graduate students and parents of undergraduates can borrow in federal student loans. However, some advocates including Hounanian, warn that the move would only force families to turn to other means that offer fewer consumer protections.