Millennial Student Loan Debt: 7 Things You Should Know
America If you’ve been paying attention to the news this year, you’ll know that one of the biggest problems in America today is the level of student loan debt. In 2018, the national student debt topped out at a dangerously high $1.5 trillion. The student debt in America no longer qualifies as an issue, but rather a full-on crisis. The numbers across the board are staggering, but in this article, we will focus on the burden rising tuition costs is having on millennials.
Here are seven things you should know about millennial student loan debt.
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The Average Student Debt for 2018 Graduates is $37,172
It’s hard to put a positive spin on this stat, courtesy of Cometfi. That amount of money works out to roughly $393/month for loan payments. For many millennials, that is a sizeable chunk of their checking account. With numbers like these, it’s easy to understand why the student loan debt in America has reached such staggering heights. The fact of the matter is, college keeps getting more and more expensive.
Student Loans Aren’t the Only Thing Holding Millennials Back
In fact, student loans aren’t even the most common problem when it comes to millennial debt. According to a recent study, three out of every four millennials in the U.S has some sort of debt. Of those surveyed, 46 percent have credit card debt, while 36 percent have student loan debt. Car loans rank third for most common, affecting 34 percent of those surveyed. As you can see, millennials are facing challenges in more areas than just their student loans.
Millennials Have it Worse Than Previous Generations
Okay, that’s not to say that Gen Xers didn’t have an easy ride either, but statistically speaking, millennials have been at a bigger disadvantage. Student Loan Hero conducted a study around the cost of living for millennials versus that of past generations. Here are some of their key findings:
Millennials pay the highest rents when entering the workforce, with a $1,358 average in 2017. Gen Xers meanwhile paid $850 (in today’s dollars) for rent during the same time of their lives.
When millennials were first born, the average tuition at a public four-year college was just over $3,000. When it finally came time for them to enroll, tuition climbed an astonishingly 213% to nearly $10,000.
Sure, millennials are making more money due to the 67% rise in wages since 1970, but rent, home prices, and college costs have all increased dramatically as well due to inflation. Overall, the cost of living is much higher now than it was in the past, which is forcing Millenials to pay more for necessities like housing, which then prolongs the process of paying off those student debts.
Student Loan Debt Has a Direct Impact on New Business Formation
Small businesses are created using a form of personal debt for funding (example: credit card, or a home equity loan). With a large amount of student debt, these other forms of credit are not as available. Along with this, millennials with excessive loan payments will be less likely to risk starting a business, because they need a concrete, steady job to avoid defaulting on their loans.
A study by the Federal Reserve Bank of Philadelphia dove into this issue by examining different counties and comparing the average student debt in that county to how many new businesses have been forming. The study found that there was a pattern, the counties with higher student debt were more likely underperforming in the number of small businesses being created.
As student debt continues to be an issue going forward, we are in danger that more and more millennials will avoid opening up entrepreneurial businesses, which plays a large role in economic growth and job creation.
Student Loans Are Holding Millennials Back From Becoming Homeowners.
In a study conducted by Apartment List, 6,400 millennial renters around the country were surveyed, with an overwhelming majority saying they wanted to move away from renting. However, 48 percent of the respondents said that they had nothing saved for a down payment. The main reason for millennials not being able to carry out their dreams of owning a home is because of the student debt.
According to the authors of the study, “Student debt is keeping homeownership out of reach for many millennials – we estimate that 23 percent of college graduates without student debt can save enough for a down payment within the next five years, compared to just 12 percent of college graduates who are currently paying off student loans.”
Student Loan Debt Harms Graduate Happiness
A recent Gallup poll surveyed 30,000 college graduates (both past and recent) and found that those who graduated with more debt scored lower on questions revolved around their overall wellbeing when compared to graduates who had less debt. Questions included how well they felt physically. Whether they felt connected to their jobs, and if they had good social relationships.
Students are also having to deal with more persistent efforts from collection agencies as well. As reported by Cornerstone Support, states are also making it easier for these agencies to try and collect these debts, with California recently updating a law stating that debt collectors were not student loan servicers, meaning they are not required to get a license.
Millennials Are Still Optimistic About the Future
Despite the previous point, millennials are trying to change that trend. In that same survey, 58 percent of respondents said they were optimistic about paying off student loan debt, finding and keeping a solid job, and being able to afford the lifestyle they want.
Going forward, it will be this optimistic attitude that will help millennials get through the tough times ahead. However, if the trends continue, it will take more than a positive outlook and a good work ethic for future college graduates to stay afloat.
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