Debt and more debt: student loans and family formation

Quote
“Education is the best provision for old age.”  Aristotle

News

Results of a survey of teenagers in Britain this week show that half of them are less likely to apply to university due to steeply rising tuition fees.  The British government will allow universities to raise maximum fees from £3300 to £9000 a year starting in 2012; two thirds of institutions say they plan to charge the full amount.

Proponents of raising tuition fees and making students pay for them through loans make an economic argument.  Graduates earn more with a degree, so can repay the debt from their higher salaries (under the new rules 9% of everything earned over £21,000 will repay loans, and any balance will be written off after 25 years). 

However, this ignores the relational implications of loading students with high levels of debt.  In previous generations, graduates in their twenties would have saved up for two major events: buying a house, and getting married/starting a family.  These two milestones are now reached later, due largely to the rising ratio of house prices to salaries, and the tendency to cohabit or marry later.

With rising student debt, those who still go to university will take even longer to buy their own home or start a family.  The delay in family formation puts greater pressure on women than men, as their remaining fertile years become fewer, and the health risks (to both mother and child) of having children in their late 30s or 40s increase. 

The cumulative impact of these factors will be to reduce birth rates; one long term consequence will be fewer people of working age to support retired people – adding fuel to the fire of the looming pensions crisis.

Raising tuition fees and leaving students with high levels of debt may save government expenditure in the short run, but even in purely financial terms, the collateral damage to relationships may end up costing the nation far more than it saves now.  The relational loss in terms of postponed marriage and fewer children is impossible to measure.

Read on...

The changing trends surrounding patterns of cohabitation and marriage in the UK is a research concern of the Jubilee Centre; their latest report, ‘Cohabitation: an alternative to marriage?’ has just been published and can be read here.

Walk the talk

Although irresponsible use of debt is behind the global financial crisis, it is still seen as a solution of choice to a range of economic problems.  How might you help your family or colleagues to recognise the long term consequences of debt and to explore other solutions instead?

The last word
From the Bible, 2 Corinthians 12 verse 14 “…after all, children should not have to save up for their parents, but parents for their children.”