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Behind the falling US birthrate: too much student debt to afford kids?

The record-low birthrate in the US is showing no signs of bouncing back, even with the economy on the mend. Evidence is growing that huge student debt may be deterring people from starting families.

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Then there are the hard financial lessons of the recent recession, which baby-boomer parents are intent on driving home to their 20- and 30-something offspring.

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"You have a Millennial generation [born after 1980] whose parents have just lived through the worst economic downturn since the Great Depression, and now we're telling them there are consequences to every financial decision, so be careful who you marry, why you marry, and when you have children," says Jim McGinnis, a divorce attorney and partner at Warner, Bates, McGough & McGinnis in Atlanta.

His own sons, ages 22 and 24, for example, couldn't be further from thoughts of marrying, buying a home, or having children, Mr. McGinnis says. The 24-year-old was just laid off from an internship. "They all went off to college thinking there would be plenty of people waiting to hire them when they got out," McGinnis says. "The big shock is that it just isn't so."

If the US birthrate does not pick up as the economy improves, the consequences could eventually be severe and far-reaching, warns Cheryl Carleton, a demographics expert and an assistant economics professor at Villanova University School of Business in Philadelphia.

For an economy to grow, it needs workers – and young workers are generally the most flexible and adaptable, she says.

Moreover, fewer children now means fewer children in the future, Dr. Carleton adds, noting the peril of a downward spiral toward negative population growth.

"Fewer younger people to care for an aging population puts more pressure on government to fund the care," she adds via e-mail. And, perhaps most important, a larger younger population provides more funding, through payroll taxes, to pay for Social Security for the older population.

First steps to lighten the load

Government efforts to ease the debt squeeze for young people have already begun. Congress voted over the summer to prevent the interest rate from doubling on some new federal student loans. And Washington has changed the repayment terms on certain loans, allowing forgiveness of a loan balance after 20 years of payments (if all terms are met) rather than after 25 years. Some loan repayments can also now be indexed to no more than 10 percent of the borrower's annual income.

Such changes, though, do not do much to help millions like Coey and Hu, who either have private lender loans that do not qualify for such breaks or don't have jobs that qualify them for a shortened time of loan repayment.

The long-term picture points to an irreversible trend in fertility rates across the globe, says Mark Rank, a social work professor at Washington University in St. Louis. "Back in 1800 it was around eight or nine [births] per woman, and now it's not even two," he says.

"But now it's time to invest in our people," relieving young people of outsized debts before they have even begun their working lives, he says. There's a precedent for such a step: the GI Bill after World War II that "helped with housing and education, and it made an enormous difference," Dr. Rank says.

In the past, he adds, noting the postwar spike in the US birthrate, "it paid off many times in terms of productivity."

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