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By Dante Chinni and Sally Bronston
WASHINGTON – The college admission scandal may have driven the conversation about higher education this week, but away from the headlines the much larger story is student loan debt and what it does for a generation of Americans.
For a large group of young people, many so-called Millennials, the desire to attend the best possible school (and the desire for graduate degrees) combined with budding college costs will fundamentally change the economy – and the next era of American politics.
Consider a recent analysis from the Federal Reserve staff. It turned out that the average student loan debt in the 24- to 32-year-olds doubled from 5,000 to $ 10,000 between 2005 and 2014. And the same report showed that residential property fell 9 percentage points over the same period for those in this age group.
Housing properties fell across all age groups by about four percentage points, but the thousand-year fall was much steeper.
You can see the impact of student loan debt on Millennials when comparing their financial obligations with other generations.
On average, Millennials aged 18 to 34 carry approx. $ 36,000 in debt, according to a 2018 study by Northwestern Mutual Life. It's similar to Generation X's, which averages $ 39,000 on average, and Baby Boomers, holding around $ 36,000 in debt, according to the survey.
But the numbers look very different in that study when you break it into categories.
The largest source of debt for Gen Xers and Baby Boomers is their mortgage rate, which is 32 percent and 25 percent, respectively, for those age groups. The largest source of debt for Millennials? Personal education loan of 21 percent.
These figures raise some serious problems. Millennials have almost the same debt obligation as their older generation models, but their debt must primarily pay off something they have already acquired, their education.
The net effect is not only a feature of their personal financial situation, but it is also a feature of the economy as a whole. This means that millions of young Americans have less money to spend on goods and services – and especially on large cargoes such as homes and cars that are the backbone of the economy.
The point here is not that all student loans are bad. Education is generally an investment that pays off over time. But the broader issue is whether skyrocketing college costs and the student loans that have followed are increasing debt amounts to unhealthy levels for the next generation.
And in the end, there can be political consequences for all these data points.
In the recent NBC News / Wall Street Journal study, we asked how the respondents felt about the word "socialism". The only age group where the majority did not perceive the word was the Millennial Group, aged 18 to 34.
Millennials definitely held mixed views on the concept. Among them, 38 percent had negative feelings about it, while 21 percent said they felt positive. The most common response among the age group was "neutral" or "do not know". Together, these responses corresponded to 41 percent.
Over all other age groups, more than 50 percent said they had negative views on "socialism".
There could be many reasons for the different feelings of "socialism." Younger voters generally tend to lean further to the left politically. And some candidates favored by younger voters have fewer concerns about the word. Remember, Vermont Rep. Bernie Sanders calls himself a democratic socialist.
But student loan data may indicate another possible reason.
Having sunk a big advance in their education, many Millennials find piles of debt in no easy way to buy into the American dream. It can leave some of those with mixed feelings about the economic system as it currently works and perhaps more hungry for dramatic changes in how it works.