The Looming Student Debt Apocalypse

These days, politicians can’t agree on much of anything. But one ray of hope that seems to inspire our elected officials to reach across the aisle is education. It’s hard to dispute that higher education is critical to America’s future prosperity.

Yet those same politicians who would argue for the prioritization of education are turning a blind eye to the fact that student loan debt is crippling millions of Americans. Education-related debt impacts more than 44 million of us, who owe a total of $1.5 trillion, making the burden of education the country’s second-largest debt after consumer mortgages.

Unless we act now, I believe student debt could well be the next crisis that could take down the American economy. But it’s not going to wake us up one morning with a slap in the face like Lehman Brothers. Rather, it’s a slow but steady sinkhole that is quietly gobbling up any hope for sustainable long-term economic growth.

Today, home ownership for Millennials stands at 37 percent, compared to 45 percent of Boomers and Gen Xers when they were the same age. The reason? They simply don’t have the money for a down payment, likely because they’re too busy paying off their student loans.

And we haven’t even touched on how student debt stifles entrepreneurship, or how debt-burdened folks will be more likely to work longer, thereby stressing the unemployment rate, or how the government is losing $170 billion on defaults and loan forgiveness. Any one of these things should be a wake-up call for politicians; all of them at once should resonate like a tornado siren.

Thankfully, there are a few silver linings to this cloud of doom that should have no problem securing bipartisan support. But we need to move now.

  • Tax credits for children’s education. Child tax credits are incredibly popular, for good reason. But they only incentivize parents to have Why not also offer parents a tax credit to educate their children?
  • Student loan forgiveness programs. Although this program is currently in the crosshairs of the administration, student loan forgiveness programs can be a wonderful thing. Let’s offer forgiveness to students pursuing careers in fields needed to keep our economy afloat, like doctors, nurses, teachers, engineers and first responders.
  • Tax deductions for tuition. Currently, tuition assistance only helps folks taking one class per semester. Why not incentivize students to get their degrees quickly? The sooner they make it into the workforce with a degree, the sooner they can boost their earning power.
  • 401(k) matches for student loan payments. The IRS should allow companies to contribute the 401(k) match percentage towards student loans. The sooner folks can get of debt, the sooner they’ll be able to become active participants in the American economy.

It’s always been this country’s bread and butter to have citizens with money to earn, money to spend and money with which to pay Uncle Sam. It’s time we took steps to ensure that more Americans — educated Americans — are set up to become fuel for tomorrow’s economy, rather than a drain on it.

Author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” John E. Girouard is a registered principal of Cambridge Investment Research and an investment advisor representative of Capital Investment Advisors in Georgetown.



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