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The Specter of Student Debt Is Bigger Than You Think

Ever-climbing tuition costs are simply unsustainable -- our economy can't bear the weight

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On top of that — or maybe even because of it — something else The Atlantic posits could be accurate:

“What if this … isn’t a temporary side effect … but part of a permanent generational shift in tastes and spending habits?”

It’s an interesting concept. As young graduates remain weighed down by debt, the shift could become an emotional one. Instead of putting off buying a house — or wanting to buy one when they can’t afford it — young adults may decide they no longer want one (especially if the mortgage-interest deduction is dropped and the tax benefit for ownership vanishes).

Or, that emotional shift could be happening completely separate from the student debt issue altogether, but compounding the effect. More people are flocking to urban areas — especially young professionals — so the American dream might not just be kicking the white picket fence to the curb, but also the house itself.

Why should we care? Well, historically, housing tends to lead the way out of recession.

Admittedly, housing seems to be doing just fine despite these issues, as evident by the fact that homebuilder PulteGroup (NYSE:PHM) and Lennar (NYSE:LEN) are among the best-performing S&P 500 stocks this year, among a pile of other promising data points.

But we still have a long way to go before we have a real real-estate recovery. Just take a glance at the Philly Housing Index, a broad measure of the health of the sector. It’s still a quarter off from 2006 highs and just now back to pre-recession levels.

Toss in a huge chunk of mortgages still underwater, concerns about the looming fiscal cliff and speculation that much of the cheering is as a result of “false positive data,” and there’s plenty more to desire in terms of the recovery.

A boost from Generation Y sure wouldn’t hurt.

Unfortunately, the heavy debt burden and an emotional shift regarding homeownership — regardless of the connection between the two — are far from short-term issues. To cite The Atlantic once more: “At a minimum, homeownership rates are highly unlikely to soon return to the peaks they hit during the housing bubble.”

Of course, the real question is what the solution should be. I’m a strong believer in the value of higher education (even the highly questioned liberal arts degrees), but I also know an unsustainable picture when I see it.

With student debt not just weighing on recent graduates, but also on the economy as a whole, this isn’t a problem we can ignore. Higher ed is becoming an ever-entrenched part of society (“Everyone should go to college!”) and more industries require a four-year degree. At the same time,  four-year degrees cost more than ever.

It seems that what we really need is a complete rethinking of our educational system and its costs. Because in the end, something’s gotta give — or we’ll all pay the price.

Article printed from InvestorPlace Media,

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