Lattes and restaurant lunches are off the table for Natalie Diaz, a North Park resident saddled with significant student loan debt from her graduate school education.
“No frivolous spending,” Diaz said. “We grocery shop at the beginning of the week, and prep meals for the whole week. That’s how we budget.”
Cutting back on restaurant meals, new clothes, vacations, and other expenditures helps Diaz and her husband make a $400-a-month student loan payment.
Those self-imposed spending restraints are evidence that Diaz is a responsible borrower, willing to forgo extras to pay back her debt. But when tens of thousands of other former students make similar cutbacks, local businesses can suffer.
When people choose not to spend money, retail stores sell less merchandise and restaurants have more empty tables.
“When restaurants take in less money, they hire fewer workers, and that, in turn, hurts other businesses,” explained Alan Gin, Ph.D., professor of economics at the University of San Diego.
Gin calls it the “ripple effect”: when San Diegans spend less for food, clothes, cars and home furnishings, those businesses are pinched, and their shrinking revenue, in turn, slows the growth of other businesses.
Workers who lose their jobs or suffer a pay cut due to their employer’s falling revenue then have less money to spend on other goods and services.
That “ripple effect” can have a significant negative impact on the local economy.
NBC 7 Investigates reviewed detailed data about the extent of the student loan problem in San Diego and nationwide.
Projections from that data indicate more than 400,000 San Diego county residents have student loan debt, with initial loan balances averaging more than $31,000.
The cutbacks those debtors make on other purchases account for tens of millions of dollars withheld from local and national businesses every month.
The housing industry is one example.
Diaz and her husband now live in a small apartment. Like many couples their age, they’d very much like to buy their first home.
“If I could put $400 towards a mortgage, that would be great,” Diaz said. But she doesn’t have that option, because that $400 goes to her loan payment, and her monthly payment amount increases as her income increases.
Fewer sales of homes and condos have a “ripple effect” on the housing industry.
“There's less work then for everyone in the real estate industry,” Gin said. That includes real estate and mortgage brokers, and says Gin, “it could even impact construction.”