Student loan debt affects borrowers in a variety of ways.
“Unfortunately, a significant portion of graduates enter the workforce with large student loan balances,” says Gabriel Kaplan, CPA, CFP, fee-only financial adviser at Wealth Habits in New York City.
“Repayment of these loans practically eliminates any possibility of saving a large chunk of money for the down payment of a home — which is the most common way to build wealth.”
According to a 2019 Bankrate survey:
- 34% of respondents have delayed building emergency savings.
- 29% have delayed saving for retirement.
- 27% have delayed paying off other types of debt, like credit cards.
- 23% have delayed buying a house or car.
- 10% have delayed having children.
The survey responses are from borrowers of every generation. However, Bankrate notes that millennials represent the largest percentage of people with student loan debt.
Even if these individuals have some cash flow, Kaplan says it’s still problematic. “A large balance of student loans lowers the possibility of getting a decent mortgage rate, as banks will see this pool of people as riskier,” he explains.
As a result, home ownership becomes a distant dream. Kaplan says many millennials will delay the purchase of a home until they’re in their mid 30s. “I think in the long run we will become a nation of renters, further exacerbating the wealth inequality,” he says.
The myth of millennial entitlement
Kerianne Vianden is a 22-year old website content writer in Phillipsburg, New Jersey. She owes $80,000 in undergraduate loan debt with a monthly payment around $500.
“I would love to move out [of my parents’ house] and live in an apartment with a few roommates, but due to college debt, I will have to stay home for years to come,” she says. “I do not see myself getting married for another six to seven years — and kids for at least seven years, although it could be longer.”
“That's if I ever have kids, as I see myself paying off my student loans for the rest of my life,” she adds. If she didn’t have student loan debt, Vianden would be more open to having kids, but says, right now, she feels burdened with debt.
Vianden would also like to have enough money left (after rent, student loans, and a car payment) to take vacations, considering herself a travel aficionado.
A poll by New America reveals that 57% of millennials consider student debt to the biggest source of consumer debt.
Vianden says millennials are in a rough place, and should be given more credit, instead of being thought of as entitled.
“A minimum of a bachelor’s degree is required to have a serious job, and even then, the starting pay is usually not enough to afford hundreds of thousands of dollars in debt,” she says of her experience.
Her parents didn’t go to college, but Vianden says they’re at the top of the food chain at their respective companies. She believes their feats would be nearly impossible to achieve today without a degree.
“I think college is great and definitely helped me succeed,” she says, “but the price tag is astronomical and is unfair to 20-something year-olds that are hindered for life because of their student loan debt.”
Marriage vows take a back seat to student loan debt
The Bankrate survey also reveals 9% of respondents have delayed getting married because of the burden of student loan debt.
That was the case for Amanda Kay of Ontario, Canada, the owner of My Life, I Guess, who has student loan debt from four years of undergraduate school and one year of a post-graduate program.
Her original debt was just over $50,000, and she now owes more than $30,000 after repaying for more than 10 years.
“My expected monthly payment is $595; but I am currently on interest-only payments of $110, because I cannot afford nearly $600 per month.”
Kay spent the first five years after graduation working two jobs to make ends meet and delayed her wedding for more than two years. “We did get married, but changed everything we had hoped to do because of our finances.” The couple had a small wedding with 65 guests, and spent around $5,000.
“We’ve been in a rental townhouse for over five years and cannot afford to move elsewhere,” Kay explains.
The townhouse is rent-controlled, and she says comparable places would cost at least $300 more each month. “Our rental has had serious mold issues since day one, and just recently, the health unit closed our neighboring unit as there was serious enough mold for it to be deemed a public safety hazard.”
However, Kay predicts it will be at least another five years before they can feasibly purchase a home — delaying homeownership until into their 40s.
Early in their relationship, they talked about having children, but Kay says the student loan debt has made it impossible. “We can barely afford to cover our own expenses; there is no way we could afford a child or two and the loss of income from one of us staying home.”
Kay says there is a misconception that student loan debt only affects young millennials. “But I am in my mid 30s, and my student loan has significantly changed where I thought my life would take me.”
Advanced degrees add more debt
A Federal Reserve report found 20% of the decline in home ownership among young adults is a result of increased student loan debt.
Shawn Breyer, owner of Atlanta House Buyers, and his wife — who is in her last year of law school — have roughly $180,000 in student loan debt. Together, their monthly payments will be $1,459 when her debt comes due.
“We have put off buying a house for a few years in anticipation of the monthly student loan payments that she will have,” Breyer explains.
Instead, they bought a duplex, where they can rent the extra unit. “This way, we can put the money we would have spent on rent or a mortgage towards that student loan debt.” After they pay off the debt, he says they’ll purchase a home for themselves.
Joshua Hastings, a Chantilly, Virginia-based blogger and teacher at Money Life Wax, says he and his wife had undergrad school debt from attending West Virginia University.
He borrowed $40,000 for his undergraduate education, and his wife borrowed more than $100,000 to earn her doctorate in physical therapy, which ultimately cost more than $160,000. Hastings also earned a graduate degree (in education), but was able to pay as he took classes.
Now they owe a combined $75,000 in student loans after “focusing on paying off student loan debt every month with all extra income.” When the coupled married in July 2016, their combined balance was more than $270,000.
Combined, they owed a minimum $2,000 each month. But after paying off some of the loans and refinancing the rest, their minimum amount is now $700 a month. They pay between $4,000 to $5,000 per month to repay the debt faster.
Hastings says the couple often thinks about life without student loan debt, and they want to travel. They had a small wedding, didn’t have a honeymoon, and — at 32 and 31 years of age — have not started trying to have kids.
“We want to start a family, but the cost of student loans [has] made it financially challenging.” He says a mortgage, student loan payments and daycare would cause too much financial stress.
“But,” he says, on the bright side, “after making more than $4,500 worth of student loan payments per month (on average) for over three years, you learn to not let it affect you negatively.”
Hastings advises others to also think positively. “Being student loan debt free will be 100% worth it [the monthly expense],” he says. “In the process of paying off close to $300,000 in student loans — when all is said and done — we have been able to become extremely financially savvy and disciplined, which will help with our future goals as a family.
High earners aren’t immune to the burden
Christine Lawler, licensed marriage and family therapist, sleep specialist, and owner of The Peaceful Sleeper in Las Vegas, Nevada, says neither she nor her husband both got through undergrad and graduate school, accruing just $90,000 in debt for his dental school education.
She says most dentists graduate with $250,000 to $400,000 of student loan debt, but her husband went to one of the cheapest dental schools in the country.
As a point of comparison, Lawler says their best friends are also dentists, and went to a much more expensive school and have close to $400,000 in debt, paying $2,000 per month just toward interest.
“It impacts their finances every month, even though they're not even able to pay the amount down.” She says these friends may not be able to secure financing to buy a dental practice and make the kind of money necessary to get ahead.
In contrast, the Lawlers made their last $5,000 payment in December to pay off her husband’s debt. Their required monthly payments were $1,000, but she says they were always looking for ways to pay more.
“Our student loan debt completely controlled my life, and I started a second business (The Peaceful Sleeper) just to make more progress getting it paid off,” Lawler says.
She actually wrote the student loan debt amount on a whiteboard in their house so they would see it every day. “It was a reminder to work to make more money and spend less, so we could pay it off.”
Lawler says the couple, both 32, have not purchased a home yet, or gotten new cars. “My husband, is 6 feet, 4 inches [tall], and a dentist making over $200,000 per year, and he is driving a 10-year-old Hyundai Elantra, because we don't want to add more debt on top of other debts.”