Student loan debt is having a profound impact on the daily
lives and spending habits of young Americans, regardless of the type of
institution they attended or the level of credential they earned, according to
the latest "Life Delayed" report from American Student Assistance,
the organization that writes the Student Loan Ranger blog.
According to the survey, 62 percent of respondents said
their student debt posed a hardship on their personal budget when combined with
all other household spending. Specifically, 35 percent said they found it
difficult to buy daily necessities because of their student loans; 52 percent
said their debt affected their ability to make larger purchases such as a car;
and 55 percent indicated that student loan debt affected their decision or
ability to purchase a home.
A lot of recent research has pointed to student debt as
being a crisis for only certain portions of the student population, such as
those who attend for-profit institutions or drop out before completion.
However, large swaths of our "Life Delayed” survey respondents from all
institution types reported having difficulty with their debt.
The study, which gathered information from student loan
borrowers who have graduated or left school,analyzes responses not only in the
aggregate but also by school type and credential earned.
Results are provided for borrowers who attended community
college and four-year public and private school for undergraduate study, as
well as for graduate borrowers and those with professional degrees like law school
and medical school degrees.
Community college students faced the biggest challenge, with
49 percent saying it is difficult or very difficult to make student loan
payments, while 48 percent of private institution borrowers and 40 percent of
public school borrowers said they faced similar challenges, according to the
study. Forty-three percent of graduate school borrowers said they find it
difficult to pay student loans each month.
While many student debt studies focus only on borrowers in
the direst of circumstances – those in default or severely delinquent with
payment – this study examines more broadly how education debt causes borrowers
to sacrifice other aspects of their financial well-being.
For example, a majority or near-majority of alumni who
borrowed for undergraduate study said their student debt has affected their
ability to put savings aside for an emergency fund or for retirement.
Similarly, 41 percent of graduate borrowers said they do not have any emergency
savings, and 61 percent of graduate school borrowers say that student debt has
affected their ability to save for retirement.
On a positive note, the study found that 65 percent of
borrowers still believe a college education is worth the investment, despite
the debt. A majority of borrowers, though, said they were either unsure they
would have made the same college choice or definitively would not have made the
same choice to attend their alma mater, if they knew then what they know now
about loan repayment.
So what does all this tell us about the state of student
debt in the U.S. today, and what can we do about it? First, while higher
education is still a great investment, we should recognize that there are
downsides if a more highly educated generation becomes a more indebted one.
The impact of student debt goes far beyond whether
individual borrowers can keep up with their student loan payments; there are
ramifications for borrowers' short-term personal finance decisions and
long-term financial security – which in turn broadly affects our consumer-based
economy.
Second, just as student debt affects us all, solving the
student debt challenge will require input from all walks of life. The study
puts forth a number of solutions, from colleges doing more to control costs and
providing better financial education during and after school, to state
governments investing more in higher education, to the federal government
lowering student loan interest rates, and to employers stepping up to help
employees pay down their education debt.
Consumers have a role to play, too, in the solution – and
they don't have to wait for any of the above policies to take hold.
Respondents overwhelmingly reported not being prepared for
borrowing student loans. Only 38 percent said that, prior to entering school,
they fully understood the amount of debt they would be taking on. If you're
thinking about borrowing in the near future, make a commitment to become a proactive,
empowered consumer of higher education rather than a passive financial aid
recipient.
Use tools that the Education Loans has
highlighted to find the best college fit academically and financially, and
learn ways to maximize free money and federal aid before borrowing.
If you already have student debt, explore all your options
to make repayment more bearable.
Ultimately, the more you understand how to take control of
your education debt, the less you'll have to sacrifice in your overall financial
security.
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