Effects of Student Loan Debt on Economy [2026]: Data Analysis

Report Highlights. The economic impact of the $1.838 trillion U.S. student loan debt includes reduced consumer spending, business stagnation, and delayed homeownership.

42.3 million Americans have federal student loan debt.
51% of renting student borrowers indicate their loan debt is a reason they haven’t purchased a home.
Student borrowers who owe more than $30,000 are 11% less likely to start a new business than entrepreneurs with no education debt.
28% of student loan borrowers have delayed a car purchase due to education debt; 21% have postponed starting a business.
The total student loan debt balance grew 282% over 20 years ending 2025.

Line graph: Annual Growth of Average Consumer Spend & Federal Student Loan Debt according to the U.S. Bureau of Labor Statistics & Department of Education

Student Debt Economic Impact

Economists compare the rise in student loan debt to “the housing bubble that precipitated the 2007-2009 recession” and the subsequent economic downturn.

Each time a consumer’s student debt-to-income ratio increases by 1 percentage point, their consumption declines by 3.7 percentage points.
The average federal student loan debt balance is $39,633 in the first fiscal quarter (Q1) of 2026; including private loans, the average debt may be as high as $42,953.
Starting salaries for the Class of 2024 averaged $65,677 among bachelor’s degree holders.
Among bachelor’s degree holders over the age of 25, median annual earnings were $80,236.
71% of college students^* report delaying one or more major life events due to student loan debt.
The average federal student loan debt balance represented 57.0% of the median salary among bachelor’s degree holders in 2024.
Since 2005, homeownership among recent college graduates has declined by 1.8% for every $1,000 of their student loan debt.
Business income is 42% lower for the average business owner with $10,000 in student loan debt compared to one with no student debt.

^*Includes current students as well as recent graduates who stopped-out before finishing their program.

Line graph: Average Federal Student Loan Debt-to-Income Ratios according to the National Association of Colleges and Employers, the U.S. Bureau of Labor Statistics, and the U.S. Department of Education

Student Debt Reduces Spending

Consumer spending is directly linked to personal finance. Economists agree that when consumers have less expendable income due to debt obligations, they decrease spending.

18% of student loan holders find it difficult to buy daily necessities because of their student loans.
Total student loan debt represents 9.73% of household debt and credit.
Student loan debt may inhibit a consumer’s spending for decades as it takes the average student loan borrower 18 ½ years to pay off their loans in full.
35% of borrowers have foregone a vacation due to their student loan debt.

Bar graph: Student Loans as a Share of Household Debt according to the Federal Reserve Board of Governors and the Federal Reserve Bank of New York

Student Debt Inhibits Business Growth

Small businesses are especially vulnerable to the economic impact of student loan debt as they are the most likely to rely on personal financing.

$10,000 in student loan debt may reduce the likelihood of starting a new business by 7.37%.
A 3.3% increase in student loan debt correlates with a 14.4% decline in new business creation at the county level.
One-in-four U.S. labor force participants borrowed student loans.
20% of American small businesses fail in the first year.
A reported 15% of small business loans distributed by U.S. financial institutions go to startups.
A joint study by Pennsylvania State University and Federal Reserve Banks finds “a significant and economically meaningful negative correlation between changes in student debt and net business formation for the smallest group of small businesses, those employing one to four employees…”
- 29.811 million American businesses are sole proprietorships.
- Sole proprietorships represent 82.4% of U.S. small businesses.
- 99.9% of all businesses in the U.S. have fewer than 500 employees.

Line graph: Annual Growth of Homeownership & Average Federal Student Loan Debt according to the U.S. Census Bureau and Department of Education

Student Debt Hampers Housing Markets

Consumers with student loan debt have lower credit scores on average and are more likely to live with their parents.

24.7% of American renters born between years 1982 and 1996 (the Millennial generation) never expect to own a home.
Among Millennial renters who never plan to buy a home, 74% say it’s because homeownership is unaffordable.
In two years, the rate of Millennial renters giving up on homeownership increased by 60.9%.
Each living generation in the U.S. has purchased homes at a slower rate than the previous generation.

100% stacked bar graph: Social Safety Net Usage among College graduates, Adult non-graduates, and Under 18 according to the U.S. Census Bureau

When household debts and expenses exceed income, Americans may rely on social programs to make ends meet.

Among social safety net program users, advanced degree holders increased 31.5% between 2013 and 2022.
In 2013, 14.4% of social program users had bachelor’s degrees; by 2022, 17.4% were bachelor’s degree holders.
11.7% of Americans receive SNAP benefits (i.e. “food stamps”) making it the second-largest nonmedical social program after social security.
18.9% of adult SNAP recipients have college degrees, including associate degree holders.
SNAP recipients include 4.661 million college graduates; an additional 5 million SNAP beneficiaries attended college but did not graduate.
2.36% of adult SNAP recipients have advanced degrees, such as master’s or doctorate degrees.

Line graph: Annual Growth of Total Student Loan Debt & U.S. GDP from 2007 to 2025 according to the U.S. Bureau of Economic Analysis and the Federal Reserve Board of Governors

Student Debt as an Economic Indicator

Data points such as a country’s gross domestic product (GDP), worker income, and household debt indicate a nation’s economic health.

The total student loan debt balance exceeds all other types of household debt except for mortgage debt ($13.17 trillion).
Total student debt represents 7.04% of Americans’ personal income ($26.116 trillion in 2025).
Personal income had a 5.90% compound annual growth rate (CAGR) from 2020 to 2025.
Also from 2020 to 2025, the total student loan debt CAGR was 1.97%.
From 2010 to 2020, personal income and student debt had CAGRs of 4.54% and 7.44%, respectively.
Also from 2010 to 2020, the U.S. GDP had a CAGR of 3.62%; from 2020 to 2025, the GDP CAGR was 6.19%.

Economic Effects of Student Loan Debt