The Student Loan Crisis: Fact or Fiction?
Article Type: Quick and Dirty

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Let's say you have a friend. He's a great guy—smart, funny, and well-educated. Let's call him Tobias. Good ol' Toby is saddled with astronomical student loan debt. We're talking borderline ridiculous amounts.

How does he manage to exist with that staggering debt cramping his style? He can't even afford a halfway decent outfit.

A lot of the conversations about student loans in America focus on cases like Tobias's: a student has so much debt that paying it back becomes impossible. What's not always obvious is how much of the student loan debt crisis is breathless media reporting and how much is real life. Let us clear help it up for you, since we've got the lowdown on this topic...unlike your weird cowlick, which we are powerless to correct. Sorry.

The balance of outstanding student loan debt, including both federal and private loans, ballooned to over one trillion dollars in 2014 (source). This number is worrisome. Not to mention all of those debt holders who are forced to default on their loans or are in danger of doing so.

Since student loans now account for the highest percentage of consumer debt, following mortgages (source), you might think that the news is all bad. We are all Tobias, broke and headed toward financial ruin like an out-of-control mine cart.

Not so fast, our nervous friend. The student loan debt is only 7% of the U.S. gross domestic product (source). Translation: it is unlikely to wreck the economy any time soon.

Plus, the median monthly payments of student borrowers have remained pretty consistent since 1989 (source), even as the total amount of debt has risen. This is an indicator that student loan debt has remained manageable for many students. Hip, hip, hooray!

These statistics might offer little comfort for individual borrowers, however. In a 2013 survey, 75% of self-selected young professionals said that student loan debt had an effect on their decision or ability to purchase a home and 73% said that loans had caused them to put off saving for retirement (source). Students with significant student loan debt are also less likely to start businesses (source).

Unsurprisingly, there are also emotional and psychological drawbacks to being heavily in debt. (Who'd have ever thought that owing other people money would be bad for your psyche?) Some research has shown that people in debt are more likely to suffer from depression (source).

We don't think it's an exaggeration to say that debt is a humungous bummer.

So even though student loans may not be the bogeyman we've heard about, the overwhelming amount of debt can still be destructive in multiple ways. The cost—both to taxpayers and to borrowers themselves—might be a good reason to consider reforming the trillion-dollar behemoth. If nothing else, we should try to improve the life of Tobias.

Poor, handsome Tobias.