As Millennials enter the workforce, the burden of student loan debt shapes their view of their lives, including careers and finances.
A survey recently conducted by American Student Assistance® notes that 75% of respondents say student loan debt affected their decision or ability to purchase a home. 43% said that student debt has delayed their decision to start a family. Most concerning is the statistic that says Millennials have earned a net wealth half that of Baby Boomers at the same age. This is troubling, especially if you look at trends regarding social security and the low expectation Millennials have of receiving it when they retire.
This generation is forced to find new ways to deal with staggering debt. Many are deciding to move home with their parents, taking advantage of free or significantly reduced rent just to help them get ahead on their student loan payments, to say nothing about extras like a car or starting retirement savings. More Millennials have started to look outside of their primary 9 to 5 job to provide income and view entrepreneurship or multiple jobs as a long-term solution to their financial struggles.
In our previous post, we heard my friend share her experience with student loans. Here she talks about where she found herself upon graduating from Vanderbilt University. The scenario she describes is shared by many new graduates.
I couldn’t make enough money, even to live, without starting to pay my loans back.
The student loan dilemma
As the cost of tuition has skyrocketed, student loans have also increased. The average student loan from a public college is $ $25,550 and $32,300 from a private school. While these are just the averages, many find themselves with debt so high, they will spend most of their lives trying to repay it.
18% of a Millennial’s income goes to student loans. This is money that previous generations used to buy their homes – many American’s largest investment – or money to start saving for retirement. With such tight budgets, many student loan holders make only the minimum payments. When hardships arise, they are extending their loan repayments from 10 years to 15, 20 or even 30 years.
What’s even more troubling is as interest rates rise, the predicament many future college graduates face will only increase.
As I talk with families, attitudes vary widely about college funding. For some, paying the entirety of their child’s college tuition is of utmost importance. Some sacrifice their cash flow so their children can graduate college with no debt. Others promise their children that they will pay for college, yet have no plan in place to do so. These parents are often shocked when the college bill comes, and many times view taking out student loans for their children as their only option. Repaying these loans leads many to sacrifice their own retirement savings and plans.
But such drastic measures don’t have to be taken for your child to attend college. In my next post, I discuss the options available for avoiding unwieldy student loan debt.
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