Student debt is not only a drag on a young graduate's personal finances, but is also a drag on the wider economy and the future, says former Indiana Gov. Mitch Daniels.
College tuition is "the only major expense item in the economy that is growing faster than healthcare," Daniels wrote in an opinion piece for
The Wall Street Journal.
And only home mortgages account for more personal debt than education debt, surpassing credit cards, car loans and refinancings, according to the Federal Reserve.
Student debt is expected to reach $1.3 trillion in 2015, and the average debt among the class of 2014 borrowers is $33,000.
According to the Indiana Republican, there are already
"several damaging results" to young adults, such as delaying marriage and childbearing, postponing home and car purchases, and returning to
live at home, which takes a toll on consumer spending.
Daniels says that these trends are also making a dent on "economic dynamism" as a whole.
"The debt burden is weighing on the engine that has always characterized American economic leadership — and the factor that many have assumed will overcome many structural and self-imposed challenges: our propensity to innovate and to invent new vehicles of wealth creation," he writes.
The Wall Street Journal reported on Jan. 2 that, from 2010 to 2013, the number of younger people who owned part of a new business fell from 6.1 percent to 3.6 percent. And the number of Americans under age 34 who have started a business has fallen by almost 4 percent over the last decade.
"Common sense says that seven in 10 graduates who enter the working world owing money may be part of this shift," Daniels concludes.
To support this claim, he cites a Gallup study that found that "26 percent of those who left school debt-free have started at least one business. Among those with debt of $40,000 or more, only 16 percent had done so."
Daniels is currently serving as the president of Purdue University in Indiana.
He says that Purdue has managed to reduce the cost of attendance over the last two years "for the first time on record," after imposing a three-year tuition freeze, in addition to reducing room and board costs and textbook prices.
In addition, through "aggressive counseling of students about the dangers of too much borrowing, and the alternatives available to them ... total Purdue student borrowings have dropped by 18 percent since 2012."
"For future generations to enjoy the higher living standards America has always promised, nothing matters more than that the U.S. remains a land where miracles of innovation and entrepreneurship happen consistently," Daniels writes.
"As a matter of generational fairness, and as an essential amount of national economic success, the burden of high tuitions and student debt must be alleviated, and soon," he adds.
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