For most college students, borrowing money to pay for their education is a necessity. According to The New York Times, about two-thirds of bachelor's degree recipients in 2008 incurred at least some student loan debt, and the average amount borrowed was more than $24,000 as of 2010. Carrying large amounts of debt can have a negative impact on students' financial future and the economy in general.
Alternate Career Path
Graduating from college with a large amount of debt can make individuals reconsider their career path. Instead of pursuing a passion that may offer relatively low financial rewards, graduates may need switch to a higher-paying career just so they can afford to pay off their student loans. Someone with a desire to help others through a career in social work, for instance, may choose a potentially more lucrative sales career, possibly resulting in disenchantment despite the higher income.
Delayed Life Events
High debt can cause individuals to postpone life major life events such as marriage, having children and purchasing a home. Instead, they may be forced to work long hours to earn enough money to meet their financial obligations. People who start families and purchase homes later in life may also need to work to an older age. They may have to put off retirement, if they can even afford to retire at all.
Credit Implications
Individuals who fall behind or default on student loan payments face the prospect of damage to their credit standing. When the time comes to purchase a home or car, they may have greater difficulty doing so. Some employers review credit scores when evaluation job candidates, so those with a poor student loan payment history may be denied career advancement. Unlike many other types of personal debt, student loans are not eligible for discharge when filing for bankruptcy.
Economic Impact
Young people who are saddled with student loan debt may be less willing or able to take calculated risks, such as starting a business, even though they may have no other family or major financial obligations. The lack of entrepreneurial achievement may adversely affect an economy's ability to grow. The inability to put money back into the economy by purchasing consumer goods can hurt existing businesses, which can also have negative economic implications, such as fewer jobs.
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