What is the impact of incurring significant amounts of student debt on future borrowing power?

Incurring significant amounts of student debt can have a substantial effect on an individual's future borrowing power, which is why the correct answer is that it reduces future borrowing power. When a borrower has a high level of existing debt, lenders often consider their debt-to-income ratio and overall financial health before approving additional loans. A higher debt load can signal to lenders that the borrower may have difficulty managing additional financial obligations.

Moreover, significant student debt can impact credit scores, especially if payments are missed or if the borrower defaults on loans. Lenders typically look for borrowers with good credit histories and manageable debt levels. Thus, if an individual's credit score is negatively affected by high levels of debt, it can further limit their ability to secure future loans or credit.

While the job market's state can influence a graduate's employment opportunities and salary potential, the fundamental principle remains that significant existing debt generally constrains a borrower's ability to take on more debt. This is because lenders use debt levels as a key factor in assessing risk, affecting the terms and conditions under which they extend credit.