According to a new report issued by the Public Higher Education Network of Massachusetts, increasing student debt in the state is not only affecting students and their families, but also the state’s economy.
Written by Anastasia Wilson, a Ph.D. candidate in economics, the 54-page report, “The Causes and Consequences of Mounting Student Debt in Massachusetts,” takes a closer look at the increasing cost of higher education in Massachusetts as well as the rising amount of student debt.
“Public higher education in Massachusetts is facing economic problems that threaten the current and future prosperity of the Commonwealth,” she wrote. “Students and their families have suffered steep increases in tuition and fees, even when expanded financial aid is taken into consideration. The resulting increase in student debt is likely to reduce both consumer spending and investments in housing and automobiles, lowering output and dampening economic growth.”
Wilson continues to say that it is because the state is putting less into higher education that the cost of tuition and fees are on the rise, increasing student debt. This is causing more of the burden to placed on students and their families, while also creating a state of uncertainty concerning future price increases.
She said that the rising student debt could cause many students to put off graduation, prevent recent graduates from starting their own businesses, or increase inequalities found between races and genders.
In addition, she claims that the rising amount of debt will hinder a student’s ability to take on other loans such as for cars or mortgages, which can affect the economy as a whole.
“Given the 2012 levels of borrowing, the model estimates that for every $1 of student loan debt, there is a $4 wealth loss associated due to forgone savings and home equity over a 40 year working lifetime.” The 967,000 borrowers would “cumulatively experience a $2.5 billion per year in forgone savings and equity (in current dollars). Using an approximation of average student loan payments also yields a conservative estimate of reduction in consumer spending of about $234 million per month by student debtors in our state,” she said in her report.
Natalie Higgins, a spokeswoman for the higher education network, said while the report reaffirmed already held beliefs on the subject, they had never before seen the numbers pertaining to savings lost for the state, writes Diane Lederman for Mass Live.
Data for the UMass Board of Trustees’ Committee on Administration and Finance found that 74% of 2014 graduates have an average of $29,406 in student debt. That number has increased since 2011 when graduating students held an average of $27,448 in debt.
The report is expected to be presented to the Public Higher Education Caucus at the Massachusetts State House in late May or June.