Over half of the people who graduated from college with student loans over the past 15 years believe the value of the diploma doesn’t outweigh the burden of debt, according to a 2019 survey by MorningConsult.1
Almost 65 percent of current undergraduates, even those without student loans, don’t think a college education is worth the cost.
Part of the problem is that students take out loans without a clear understanding of what they are committing to, and how significantly these loans will impact their lives for a long time after graduation.
By educating students about student loans before they sign on the dotted line, financial wellness programs can be the difference between a lifetime of struggling to get ahead and actually getting ahead.
The impact of student loan debt is not exaggerated.
Impact on Home Buying
For those with student loan debt, it will take much longer to own a home.
A Zillow report shows that 25 percent of those with student loans were denied a mortgage.2
A SmartAsset study found that, even for those living in a top wage-earning city, it will take up to 10 years to save for a 20-percent down payment on a home.3
To make matters worse, even rental prices have increased.
The U.S. Census Global Property Guide shows that rental prices have increased by 33 percent in the past 10 years.4
This means that housing costs, even for renters, is consuming between 30 and 40 percent of their annual income.
Impact on Saving Money
Even though they come to the table with a college degree, today’s graduates won’t make as much money as their parents did.
According to a recent Clever study, students believe they will make an average of about $60,000 after one year on the job—$10,000 more than the national median.5
Not only will Gen Z make less than they imagine, but they will also make 20 percent less than their parents did at the same time in their lives.6
Add 20 percent of their annual income for student loan debt to lower-than-expected wages, higher housing costs and rising medical insurance and costs, and it is easy to see why recent college graduates have a difficult time saving money.7
A GOBankingRates survey shows that 46 percent of Generation Z have no savings.8 More than 80 percent have less than $5000.
It isn’t much better for millennials (born between 1981 and 1996), with nearly three-quarters having less than $5000 in savings and nearly 50 percent living paycheck to paycheck.
The best time to begin saving for retirement is right after college. This allows graduates to take advantage of compounding returns.
In this way, student loan debt will affect their net worth for years to come.
Impact on Mental Health
Financial struggles often lead to mental health issues. There is substantial data showing how financial stress is affecting millennials.
An analysis of Blue Cross Blue Shield data9 of millennial health shows:
- Depression is on the rise – up 47 percent since 2013
- Suicide has increased – up 35 percent
- Drug-related deaths rose – up 108 percent
- Alcohol-related deaths increased – up 69 percent
These mental health issues, along with a significant finding of burnout (70 percent)10, have led 50 percent of millennials to voluntarily leave their job due to mental health reasons.11
Unfortunately, such job hopping can lead to employers and lenders viewing them as unemployable and unreliable.
Impact on Happiness
For those strapped with student loan debt, having fun isn’t something high on the “must-have” list.
By the time these individuals have taken care of food, shelter, clothing, transportation, and medical, there just isn’t much money left to spend on the enjoyable things in life.
A recent survey by Student Loan Hero found this to be true.12
When asked what individuals put off due to their student loans, answers included:
- Marriage and family
- Buying a home
- Donating to charity
- Going out with friends
Although money doesn’t buy happiness, a Princeton psychologist has found that financial security does.13
Those with unmanageable student loan debt delay financial security and making major financial goals.14
How Financial Wellness Programs Can Change Lives
College students are taking out student loans as a last resort and without essential information, including ways to finance college, how to avoid borrowing more than necessary, repayment options and more.
According to a 2016 Sallie Mae study15 of college students:
- 33 percent want information on how to pay for college
- 38 percent want help understanding personal finances like budgeting
- 48 percent want strategies for limiting student loans
The iGrad Financial Wellness Program gives students:
- In-depth knowledge of student loans
- Interactive budgeting tools
- The Student Loan Snapshot Tool, which helps students borrow smarter and compare repayment options
- A scholarship search tool
- An interactive financial aid “coach”
- Financial educational content including nearly 1500 articles and 250 videos
- A gamification hub with fun educational games and simulators
1 - https://morningconsult.com/wp-content/uploads/2019/04/190331_crosstabs_INSIDER_Adults_STACKED_v1_ML.pdf
2 - https://www.zillow.com/report/2018/
3 - https://smartasset.com/mortgage/years-of-work-to-afford-a-down-payment-2019
4 - https://www.globalpropertyguide.com/North-America/United-States
5 - https://listwithclever.com/real-estate-blog/college-student-salary-expectations-study/
6 - https://smartasset.com/retirement/the-average-salary-of-a-millennial
7 - https://www.prnewswire.com/news-releases/td-bank-survey-finds-americans-spend-more-than-20-of-their-take-home-pay-on-student-loan-debt-impacting-their-long-term-financial-health-300898679.html
8 - https://www.gobankingrates.com/banking/savings-account/best-savings-accounts/
9 - https://wellbeingtrust.org/wp-content/uploads/2019/06/TFAH-2019-YoundAdult-Pain-Brief-FnlRv.pdf
10 - https://www.gallup.com/workplace/237377/millennials-burning.aspx
11 - https://mindsharepartners.lpages.co/mentalhealthatworkreport2019/
12 - https://studentloanhero.com/featured/graduates-student-loan-debt-financial-milestones-survey/
13 - https://pr.princeton.edu/pwb/volume98/issue20/money/
14 - https://www.bankrate.com/loans/student-loans/student-loans-survey-february-2019/
15 - https://news.salliemae.com/sites/salliemae.newshq.businesswire.com/files/doc_library/file/SallieMae_MajoringinMoney_2016.pdf