Thanks to student loan debt, student borrowers and graduates are putting off buying homes, starting families, and saving for retirement. Interestingly enough, increased marijuana usage can be added to that list.
That’s according to Wall Street investment firm Cowen Group who came out with a research report on April 20th, also known as national weed day. The study argued that cash strapped college graduates facing student loan bills are favoring marijuana over alcohol simply because it’s cheaper.
“This shift towards higher student loan debt levels disproportionately affect millennials who are likely more price sensitive,” wrote a group of Cowen analysts led by Vivien Azer in a research report covered by Money. “Supporting our contention that ‘Buzz for Your Buck’ considerations are driving substitution among this younger cohort.”
According to the Cowen analysts, cannabis usage has increased 4.6 percent among U.S. residents aged 18 to 25 during the past seven years. At the same time, the analysts said that student loan debt has increased 36 percent as a proportion of household debt, surpassing credit cards and auto loans. Cowen’s comments were in conjunction with the Wall Street firm downgrading their investment rating on beer manufacture Molson Coors to a hold from buy.
The analysts predicted alcohol could be under pressure for the next ten years based on its analysis covering eighty years of alcohol consumption and 35 years of pot usage in the U.S. “Consumer survey work suggests [about] 80 percent of consumers reduce their alcohol consumption with cannabis in the mix,” the analysts wrote. The analysts noted that historically cannabis and alcohol consumption in the U.S. have had an inverse relationship with usage of one going up while usage of the other goes down. Cowen pointed out that in the 1980’s and 1990’s cannabis trials increased 18 percent and alcohol consumption declined 22 percent.
Cowen may be on to something with its analysis given that student loan debt stands at more than $1.4 trillion in the U.S. alone with graduates owing an average of more than $28,000. But in some cases, students bear some of the blame based on research from LendEDU that found some students are using their student loans for things other than tuition, room and board, and books. LendEDU surveyed 500 student loan borrowers that are already in college and found that more than 6 percent have used their loan money to buy illegal drugs. In the same survey, LendEDU found that 5.6 percent of students said they have used student loan money for gambling and sports betting. An alarming 23.8 percent of survey respondents said they have used student loan money to buy alcohol, whether from a store or in a bar.
Author: Andrew Rombach
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