Housing Crisis and Student Loan Crisis Are Joined At the Hip

by Richard S. Feinsilver on April 2, 2012

Over the past few weeks, I have read and noted a number of blogs and other commentaries from respected economists and authors touting the growing concern about the student loan crisis as the outstanding balances on student loans approach the $1 trillion mark.

Many pundits have commented about the value of college education relative to its potential return of investment. Some have noted the strain it has caused, both emotionally and financially, on students who have obtained degrees in the “liberal arts” and have been forced to accept positions outside of their field of study at salary levels which may not even cover the servicing costs of their student loan obligations.

The one area that few, if any, have commented on is the growing relationship between the student loan crisis and the housing crises. No one can deny that the housing crisis has devastated our economy, and, even though we now appear to be heading in a positive direction, the economy will not pick up speed at the grass roots level until sales of existing homes return to at least 2004 levels.

In past recessions, the housing market received “kick-starts” from first time home buyers. As a consequence of the growing student loan crisis, newly minted college graduates who, in the past, would have placed home ownership near the top of their financial priorities, have now replaced home ownership with the management of their student loan debts.

The more I read about this topic, the more I fear that we will end up with an entire lost generation – a generation that may never have the benefit of home ownership. Legislators must look at the relationship between the two and provide some relief in the student loan arena to provide a light at the end of the student loan debt tunnel – even if that comes in the form of partial relief through an amendment to the bankruptcy laws. This may be the only way that we may be able to fully emerge from the housing crisis….

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