Even though there are signs that the housing market is recovering, it’s still limping along. The Wall Street Journal reports that economist Lawrence Summers puts a large portion of the blame for a sluggish housing recovery — and a slow recovery for the economy in general — on student debt that amounts to more than $1 trillion.
Student Debt is a Macroeconomic Issue
According to Summers, student debt has become an influential macroeconomic issue. The Wall Street Journal reports that he said that student loans have moved from a smaller educational finance issue to having a big impact on the economy. After all, there is more than $1 trillion in outstanding student loans right now.
Many politicians and policymakers are wringing their hands right now. Many agree that economic recovery would be faster if it weren’t for the student loans. There are a number of young graduates reluctant to take on mortgage debt and other costs when they have tens of thousands of dollars in student loan debt hanging over their heads.
Comments on the problems of student loan debt come as leaders try to figure out how to make the burden more manageable. One of the solutions offered is legislation championed by Elizabeth Warren. It’s designed to allow Americans to refinance their student loans to lower rates, making the situation easier to deal with. Summers comments, according to the Wall Street Journal are part of the effort to drum up support.
As long as young people feel like they can’t save up for a down payment, or that they have too much debt to buy, the number of first-time home purchases will remain low.