As someone with both student debt and mortgages, our encroaching deflation (and consistent below-target inflation) frustrates me. Take a look at this special report by Crain's showing how bad the problem of student debt has become in general:
The share of college grads owing at least $30,000 in inflation-adjusted dollars jumped from 6 percent to 30 percent in the eight years ended in 2012, according to the College Board, while the average debt of new graduates in Illinois ballooned 85 percent, to $29,984, over the last decade. Among 46 Illinois schools reporting data to the Princeton Review, 19 say 2014 graduates' debt averaged more than $30,000. Debt for graduates of the School of the Art Institute of Chicago was $42,097, topped only by downstate MacMurray College's $50,039. Neither school commented.
A study published in 2014 by the Federal Reserve Bank of Philadelphia, noting that small businesses account for about 60 percent of net jobs and rely primarily on personal debt for startup capital, found "a significant and economically meaningful negative correlation" between growth of student debt and small-business formation.
February's unemployment rate for 25- to 34-year-olds was a seasonally adjusted 5.1 percent, not much higher than the 4.9 percent overall rate and down from 9 percent four years ago. Yet median compensation for 30-year-olds in 2014 has dropped over the last decade to mid-1980s levels, according to the Center for American Progress in Washington, D.C.
So let's review:
- You need a college degree to meet the minimum qualifications for most jobs.
- College costs have risen at multiples of inflation for 20 years or more.
- Students have to borrow more money than ever before to get the college degrees they need to get jobs.
- The resulting debt service depresses consumer spending, reducing demand for goods and services, and making the jobs even scarcer.
- Republican Party policies aimed at reducing taxes and government spending, especially in the wake of the 2008 crash, have also suppressed demand for services.
- Republicans have also simultaneously chipped away at the social safety net built up by bipartisan governments from 1934 to 1976, making repaying debt even harder for people living on the edge.
- Let's not forget the Republican-drafted, Bush-approved bankruptcy law of 2005 that makes it impossible to get out from under crushing student-loan debt in most circumstances.
- All of these Republican policies cause—cause—lower inflation verging on deflation, which makes it harder to repay debts. Keep in mind that the biggest beneficiaries of lower inflation are the bankers who contribute disproportionately to Republicans.
As we say in software, the transfer of wealth from young students to old bankers is a feature, not a bug, of Republican economic and tax policies.
You want to know how to keep student debt from destroying the Millennials? Simple. Government stimulus to get us out of the deflation trap, and allowing student loans to be discharged in bankruptcy.
You want to know how to do those things? Simple. Elect Democratic majorities in Federal and state legislatures, and vote for Hillary Clinton on November 6th.