The averagestarting salary for a 2018 college graduate is $50,390, up 2.8percent from 2017, but the just-released July CPI report shows theinflation rate rose 2.9 percent over the last year. Does the phrase“treading water” come to mind? (Photo: Shutterstock)

(Bloomberg Opinion) –It's that time of year, when studentsprepare to head back to the classroom. For many taking the nextstep in higher education, the question is increasingly, “Is itworth it?” Millions of millennials have already put off settlingdown because of the rising costs of servicing college debts to the detriment of economicgrowth.

Student loans are now the second-largestcategory of household debt in America, topping$1.4 trillion and trailing only mortgages at $9trillion.

And while Korn Ferry puts the average starting salary for a 2018college graduate at $50,390, up 2.8 percent from 2017, thejust-released July Consumer Price Index report shows the inflationrate rose 2.9 percent over the last 12 months. Does the phrase“treading water” come to mind?

A recent report by Bloom Economic Research breaks out thedemographic challenges that have resulted from the 176 percentincrease in student loan debt in the decade through 2017.In the years leading up to the housing crisis and the dramaticloosening of mortgage credit standards, many families tappedreadily available home equity to finance pricier higher educationsfor their children than they would have otherwise been able toafford. After the bust, this avenue was blocked, leaving onlythe higher education inflation it had fueled.

From 2007 through 2017, the CPI rose by 21 percent. Over thatsame period, college tuition costs jumped 63 percent, schoolhousing surged 51 percent and the price of textbooks by 88percent.

These troubling growth rates wipe away any mystery behindtoday's staggering levels of student loan debt, whichhave almost tripled from the 2007 starting point of $545billion. As of the fourth quarter, student loans represented10.5 percent of a record $13.1 trillion in U.S. household debt, upfrom 3.3 percent at the start of 2003.

Regardless of income bracket, housing is the biggest line itemin family budgets. On that count, the best news for fresh grads isthat rent growth appears to be slowing as a flood of apartmentsupply hits the market. According to RentCafe, the average rent inthe U.S. was a record $1,409 in July, a 2.8 percent from a yearearlier.

While rent growth has stopped outpacing gains in salaries, thelevel is nevertheless prohibitively high for many, especially thoseweighed down by student loans the minute they cross the stage. Theaverage student loan payment is $351. Tack that on to average rentsand you're pushing $1,800 before you hit the online grocery appicon on your smart phone, the bill for which runs at least $100 amonth for most of us. Using college grad starting salaries, thattakes up a large chunk of monthly take-home pay of about $3,400 ifyou live in Texas or $3,100 if you're in New York.

The latest demographic breakdown available has an end point of2016. What we know through that period is that 22.4 percent of allU.S. households carried student debt, with the percentage rising to44.8 percent for those aged 18-34, or $33,000 on average, up from18.6 percent in 2001. The average household has to save foralmost six and a half years to cover a 20 percent down payment on ahome at current prices, according to a recent study by Zillow'sHotPads. That's based on the steep assumption that workers can sockaway 20 percent of their monthly take-home pay.

The outer birth-year band for millennials is 1981, making 2018the year millennials are closer to 40 than they are to 30. Whilehomeownership has picked up, it's been held back for a decade dueto the stagnant wage growth coupled with onerous debt burdens. Themacroeconomic ramifications are well-documented. Baby boomers housea record level of their millennial offspring who can't afford toleave home. Birth rates have fallen to a 30-year low asmarriage is put off. Emanating from this trend is the money notplunked into nesting as families grow, a consequence not lost onFederal Reserve Chairman Jerome Powell.

“You do stand to see longer-term negative effects on people whocan't pay off their student loans. It hurts their credit rating, itimpacts the entire half of their economic life,” Powell said inMarch. “As this goes on and as student loans continue to grow andbecome larger and larger, then it absolutely could hold backgrowth.”

Clearly, reform of some kind must address the issue of studentdebt, which is not to say debt relief or outright forgiveness.Institutions of higher learning in this country must take some ofthe responsibility for the current state of affairs in the nation'smost populous demographic group. And while the misguided culturalstigmatization of vocational education appears to finally beabating, further inroads to reintroduce balance to the workforcemust be made.

The return on investment in a four-year degree isn't asstraightforward as it was for high school grads circa 1988. Thereality of cost burdens must be weighed against the quality of lifemillions have forsaken thanks to the ease with which they've beenable to finance the higher educations that have rendered theirlives to lower rungs.

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