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As millennials struggle under piles of debt, the St. Louis Fed offers new context, data

GotCredit | Flickr | http://bit.ly/1TPsTLr
A new St. Louis Fed study confirms: student loan debt is still crippling the younger generation…as are car loans.";

The Federal Reserve Bank of St. Louis just released a report about various kinds of debt and how it is impacting different populations in St. Louis, Memphis, Little Rock and Louisville. Spoiler alert: yes, student loan debt is still crippling the younger generation…as are car loans.

As the report points out, the delinquency rate for young borrowers has increased since before the recession. Such delinquency rates can mean a host of problems in accessing credit and the ability to save as young Americans start their adult lives.

Lowell Ricketts
Credit Kelly Moffitt | St. Louis Public Radio
Lowell Ricketts

On Wednesday’s “St. Louis on the Air,” Lowell Ricketts, a senior analyst for the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis talked about the levels and trends of various kinds of debt that are illuminated in the report.

Host Don Marsh also checked in with Joey Kouri, a former Saint Louis University student we spoke with in 2013 about his student loan debt. Kouri has said that he has accumulated about $62,000 in student loan debt and is looking at a total of $80,000 by the time he finishes his graduate degree. Compounding that with interest, Kouri could rack up between $95,000 and $150,000 in debt he’ll have to pay off.

Optimistically, he could pay that debt off by 2029. It could take until 2044 though, in the worst case scenario. He says the debt has changed his life plans — he’s putting off a Ph.D. unless an employer pays for it and reconsidering the timeline of starting a family.

"I'd like to have a family one day, but if I can't provide for them, I don't want to put my future spouse or children where they'd be worse off because of my debt."

“I’d like to have a family one day, but if I can’t provide for them, I don’t want to put my future spouse or children where they’d be worse off because of my debt,” Kouri said. “The latest I can pay in full would be 2044, so I’d be 51 years old. Just when I’m done paying off my student loans, I hope to be paying for my children’s student loans. It is definitely a great weight and I don’t want to put undue burden on my future family.”

Kouri still finds the debt worth it, because he believes his advanced degrees will generate greater future earnings.

Ricketts said that situations like Kouri’s are not uncommon, although the average debt balance for those between the ages of 25 and 34 is around $30,000.

“Debt remains what it is—it is a huge sum of money that will take a large portion of life to pay off,” Ricketts said. “It will likely inhibit many activities, such as saving for retirement, purchasing a house, starting a small business. All of this gets delayed or even derailed.”

That spells bad news for the national economy.

“It presents a head wind economically,” Ricketts said. “Buying a home or starting a business feeds into the consumption component of real GDP growth. If it is a head wind to that, it will lower national economic growth.”

In St. Louis, 19 percent of all individuals are borrowing for student loans. That’s higher than the nationwide average, which sits at 17 percent.

Ricketts said that the delinquency rate on these loans is something people should worry about. They account for 12% of delinquency, with credit cards coming after at 7%.

Listen in for more discussion about different kinds of debt and how it is impacting the younger generation:

St. Louis on the Air brings you the stories of St. Louis and the people who live, work and create in our region. St. Louis on the Air host Don Marsh and producers Mary Edwards, Alex Heuer and Kelly Moffitt give you the information you need to make informed decisions and stay in touch with our diverse and vibrant St. Louis region. 

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Kelly Moffitt joined St. Louis Public Radio in 2015 as an online producer for St. Louis Public Radio's talk shows St. Louis on the Air.