Pub. 13 2016 Issue 4

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Issue 4 • 2016/2017 11 W ith all of the pressing issues that face Americans, there is one that seems to be consis- tently swept under the rug by those in positions of power: student loan debt. Older millennials, those born in the time period from the early 80s to early 90s, carry more debt than any previous genera- tion due to a sharp spike in the cost of col- lege education. As a result of this spike, they have increasingly resorted to student loans issued by the federal government to cover the rising costs. According to figures from Harvard’s Joint Center for Housing Stud- ies, individuals aged 20-39 have seen the occurrence of student loan debt rise from 16 percent of college graduates in 1989 to 39 percent in 2013. There has also been an increase in cases of student loan debts of $50,000 or more, going from 4 percent of college students in 1989 to 17 percent in 2013. At a total of $1.2 trillion, student loan debt has become the largest form of con- sumer debt in America. The rise in student loan debt has led to a decrease in financial stability for many college graduates. Acquiring a college degree has been traditionally viewed as a way to increase one’s earning potential. However, student loan debt is now increasingly cancel- ing out some of the benefits of earning a college degree in terms of home ownership, long-term savings, and other traditional forms of economic viability. College students are still working as hard as they have in past generations, but many are fraught with worries about how their student loan debt will affect their long-term chanc- es for financial stability. Home ownership has been one area that has been clearly affected by student loan debt. According to David Stevens, president of the Mortgage Bankers Association, first time homebuyers typically make up nearly 45% of the mortgage mar- ket in past generations, but, currently, that figure sits around 35%. There is a palpable fear of having mortgage payments to go along with debt payments. Obviously, obtaining a college degree is still enormously im- portant in relation to long-term earning potential, but the fact that many young people are questioning the significance of a degree is a disturbing trend. For example, 40 percent of 25-44 year olds who started but did not finish their bachelor’s degrees report a negative effect on their chances of home ownership based on student loans. Given the financial burden, how likely are these students to go back and attempt to finish their degrees following a hiatus? Not likely. Clearly, student loan debt does not merely have an effect on college graduates, but also on thosewho have attempted to obtain a degree. Attempting to obtain a high degree of education should not pun- ish individuals financially, but that is the reality many are facing. A high level of education should ultimately be rewarded, and these impediments are not helping young people value its importance. That is an unfortunate side effect of student loan debt. However, not only millennials are being affected by the burdens of student loan debt. According to a recent report by the Govern- ment Accountability Office, student loan debt is pushing many elderly Americans into poverty. According to the report, in 2015, “more than 110,000 senior citizens had their Social Security checks garnished to pay off student loans they’d already defaulted on.” Also, close to 70,000Americans over the age of 50 are living in pov- erty due to the fact that their Social Security benefits are being cut off to pay off student loan debts. And this doesn’t even begin to go into the fact that many baby boomers are helping their children pay off student loan debts, further cutting into their retirement savings. The most disturbing aspect of this development is that senior citizens having their Social Security checks garnished will never stop making payments under the current system without a further source of income. Many of these older borrowers are not having their debt diminished, but only seeing their benefit cuts applied to interest and fees. Since 2005, the student loan debt owned by indi- viduals over the age of 65 has nearly quadrupled. The development of senior citizens having their Social Security checks garnished be- gan in the mid-90s due to the bipartisan Debt Collection Improve- ment Act. Recently, Senators Sherrod Brown and Ron Wyden in- troduced legislation that would repeal the law. It remains to be seen if that proposed legislation will gain any momentum in Congress. Without a decrease in college tuition, student loan debt will likely continue to be an issue formany. However, the U.S. can look at oth- The Student Loan Debt Crisis By MarkAnderson, Legal and LegislativeAssistant, New Mexico BankersAssociation n The Student Loan Debt Crisis  continued on page 12