Student Loans Could Drag Down Economy, Fed Bank Says

http://www.huffingtonpost.com/2013/04/17/student-debt_n_3100940.html

The overhang of student debt on young workers may inhibit consumption and future borrowing, researchers at the Federal Reserve Bank of New York warn, potentially imperiling the economic recovery for years to come.

In a new study, New York Fed researchers said Wednesday that younger workers with student debt are less likely than their unburdened peers to have home mortgages or auto loans -- the first time that has been observed in at least 10 years and a worrying development for policymakers who have traditionally associated student debt with college education and higher incomes.

Borrowers with student loans also shed other forms of consumer debt at a much higher rate than borrowers without educational debt, the researchers found, in a sign that consumers with student loans may have lowered their expectations for higher future earnings and may have less access to loans as a result of rising student debt despite their "comparatively high earning potential."

Student debtors also may have decreased their consumption, the researchers said.