Most students graduate with a Bachelor’s Degree in debt. And if they go on to graduate and/or professional programs, it climbs even higher.
Taking just a look at those who earn a Bachelor’s, the average student loan debt from a public institution is closing in on $35,000. For students in private colleges, it’s reaching $45,000. Total student loan debt as of the first quarter of 2024 is now a whopping $1.74 trillion.
It’s no wonder that young people are now weighing the worth of that degree against the debt they will have when they enter the workforce, and the choices they will have to make to get it paid off.
Impact of Debt on Lifestyle
In survey after survey and in the results of independent research, the following negative impacts on lifestyle are predominant:
Delays in Adult Milestones
Graduates put off major purchases, such as cars and homes. Even consumer spending on less than major items is curtailed due to monthly loan payments.
Graduates are putting off marriage, and, if they do marry, delay the start of families until their finances improve.
Many graduates move back home with their parents in order to cut expenses and pay their debt off faster. Thus they “launch” themselves at a later age than previous generations.
Less Fulfilling Social and Leisure Time
Young people want to be social. They want to engage in activities with their peers. They want to date, as the online dating service Hily app clearly demonstrates. But dating can be expensive. They want to travel, and they want to have hobbies that can be expensive.
Not being able to do all of these things means they have to make some tough choices that curtail all they would like to do.
Impact of Debt on Financial and Career Goals
Savings and Investments
Hefty monthly loan payments make participating in normal savings programs offered by employers difficult, if not impossible. Over the long haul, this impacts retirement income. If saving and investing is put off until later years, the total amount accumulated for retirement is significantly reduced. And this is with a generation that cannot rely on social security benefits.
Surveys also show that young people do not have an established “emergency fund” to tide them over during economic downturns and the prospect of job loss.
Career Choices
Young people who might seek careers that they find personally fulfilling may sacrifice that fulfillment for a less attractive career path that offers greater income. Many who would love to go into social service work or teaching, for example, opt for corporate positions that offer higher earnings.
Impact of Debt on the Economy in General
Lowered Consumer Spending
When consumers reduce their spending, the larger economy suffers. It results in lower profits, layoffs, and reductions in expansion. But the impact reaches even further. During times of reduced consumer spending, states take in less in sales taxes.
When student loan payments resumed in 2023, after a brief hiatus, the New York Federal Reserve projected that there would be a reduction in consumer spending of about $1.6 billion.
Fewer Small Businesses Startups
Research has shown that student loan debt does correlate with a reduction in small business startups, at a time when small businesses are considered the backbone of the economy. There is a measurable decline in entrepreneurship in young people, aged 20 – 34. They simply don’t have the necessary funds.
Add to lack of personal funds is the difficulty in getting business loans for new ventures, because student loan debt impacts negatively on the debt-to-income ratio of would-be entrepreneurs.
Looking at Alternatives
It is no surprise that students completing their secondary educations are thinking twice about the value of a college degree. After all, they spend the first two years of college in required general education curricula that are supposed to make them “well rounded” individuals before they get into the “meat” of their majors.
They are looking at targeted programs that will have them “up and running” faster and at a lower cost. For example, students interested in IT will opt for certification programs that will net them as many certs as they want and give them skills that are in high demand.
Trade and vocational schools are also seeing an increase in enrollments. Plumbers, auto mechanics, restaurant and hotel managers, chefs, and electricians will always be needed. And because they begin their careers much faster, with less debt, they will easily be better prepared for their long-term financial goals.
