It’s a good thing that Millennials are investing so much in higher education, even if they have to take out record student loans to do so, according to White House economists.
In a new report on economic facts about the Millennial generation, which includes people born between 1980 and the mid-2000s, President Obama’s three-member Council of Economic Advisers concludes that college “remains a strong investment for most students — and will raise income levels for Millennials for decades to come well above where they would have been without those investments.”
The rising debt burden on student borrowers and its consequences for the economy have become an increasingly hot topic as total student borrowing has eclipsed $1 trillion and lawmakers such as Sen. Elizabeth Warren, D-Mass., have sought to ease repayments for borrowers.
Noting that Millennials are more likely to have college and graduate degrees than previous generations, the CEA report argues that “increasing college enrollment is a rational response to structural and cyclical trends: respectively, a labor market that confers ever large rewards on educated workers, and a weak job market which greatly reduced the opportunity cost of schooling during the downturn.” Since 2012, the report notes, total originations have begun falling.
The report acknowledges that this increase in college attendance, along with the recession’s effects on parents’ ability to pay for their kids’ education, has driven total student debt to record levels.
But the CEA economists maintain that college remains a worthwhile investment, even for low-skilled students getting a basic education.
One problem the report does acknowledge is rising delinquencies and defaults, which are concentrated among students who failed to graduate or attended for-profit colleges, who might have lower earnings with which to pay back their loans.
But the economists also shrug at the possibility that student loans might be preventing Millennials from buying homes, a fear that has been raised by many top policymakers, including Federal Reserve Chairwoman Janet Yellen. “[I]t is too soon to draw firm conclusions about the long-lasting effects of the increase in aggregate student loan debt on homeownership,” the CEA economists write, noting student borrowers also tend to earn more and that paying off student loans can improve borrowers’ credit scores
President Obama has supported measures to lower student loan payments, a fact mentioned in the report.
