12 Ways Student Loan Debt Is Holding People Back

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Student loan debt has increased significantly over the last 20 years, from an average among new graduates in 1996 of $12,850 to more than $35,000 in 2016. This debt is having a lasting impact on the financial, personal and emotional lives of graduates, a recent survey by the Student Loan Report found.

The survey of 1,220 college graduates carrying student loan debt, conducted online between July 2 and July 19, 2016, revealed that the debt is preventing them from pursuing their dreams. Whether it’s buying a home or starting a family to not working in their field of study because they can make more money elsewhere, the impacts of all this debt are very real.

Here are 12 ways student loan debt is holding borrowers back.

1. Saving for Retirement

Nearly three-quarters of respondents (73%) said their student debt was affecting their decision or ability to save for retirement.

2. Taking a Vacation

More than two-thirds of respondents (68%) said their student debt restricted their ability to take a vacation.

3. Buying a Home

A majority of survey respondents (63%) said their student debt was affecting their decision or ability to buy a home.

4. Being Embarrassed

More than half of respondents (57%) said they were embarrassed when talking about student debt with friends, family or significant others.

5. Eating Out

Nearly half of those surveyed (49%) said their student debt has restricted their ability to eat out.

6. Buying a Car

Forty-seven percent of respondents said their student debt was affecting their decision or ability to purchase a car.

7. Paying Daily Expenses

Keeping up with daily expenses was an issue for 41% of respondents.

8. Choosing a Job

Student loan debt even impacts the job choices of 41% of respondents.

9. Starting a Family

More than a third of respondents (34%) said student debt has forced them to put off or delay starting a family.

10. Socializing

Student debt has hindered 32% of respondents’ abilities to go to social events.

11. Getting Married

Nearly a third of respondents (28%) said student debt has forced them to put off or delay marriage.

12. Starting a Business

Almost a quarter of respondents (23%) said their student debt is affecting their decision or ability to start a business.

Of course, student loan debt doesn’t have to be all bad. If you make on-time payments and are able to do the same with your other bills, you can build your credit and watch your credit scores improve significantly as you pay down the debt.

If you want to see how your student loans may be impacting your credit, you can get a free copy of your credit reports from each of the major credit bureaus annually. Also, you can look at your free credit scores, updated monthly on Credit.com, which will also show you how you’re doing in major credit scoring categories, like payment history.

If you’re already behind on payments, there are some options that can help you get back on track, even if student loan forgiveness isn’t on the table. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan or you can go through the government’s default rehabilitation program. Under the rehab program, if you make nine consecutive on-time payments (they can be extremely low), your account goes back into good standing, and the default gets removed from your credit report.

More on Student Loans:

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Fewer Than 1-in-5 Families Use a Tool That Could Limit College Costs

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Setting aside savings can be difficult, particularly if you’re trying to raise a family — and that includes saving for your kids’ college educations. Only two out of five families have a savings plan for higher education prior to their student’s enrollment, and just 16% of families are using 529 college savings vehicles to pay for college expenses.

That’s according to the annual survey report “How America Pays For College” from Sallie Mae and market research firm Ipsos. The report reflects the results of telephone interviews conducted between March 16 and April 18, 2016, with 799 parents with children ages 18 to 24 who are enrolled as undergraduate students and 799 undergraduate students, ages 18 to 24.

The number of families using savings from 529 college savings plans or other college savings vehicles fell slightly from 17% in 2015 to 16% in 2016, the survey found. The average amount used from these accounts also dropped slightly, from $9,129 in 2015 to $8,315 this year.

Much like a Roth IRA, 529 savings plans have several tax advantages that can make them useful when saving for college. Contributions to the account are taxed but any earnings made on interest accrue federal tax-free. And withdrawals from the account are also tax-free so long as they’re put towards college expenses.

Families With a Plan Spend Less

The survey also found that families who did not have a college savings plan in general prior to their student’s enrollment reported spending more than twice their savings and income on college expenses over those families who did. Also, those families who had a plan reported a full one-third less borrowing by the student than those from families without a plan.

“It’s clear that having a plan for college really does pay off,” Rick Castellano, a Sallie Mae spokesperson, said in an email. “Those families with a plan are, as you might expect, more informed, but they are also saving more for college and borrowing less.”

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Chart courtesy of Sallie Mae

Families with a plan also reported greater peace of mind in regard to paying for college. The survey showed:

  • 61% of families with a plan felt completely confident they had made the right financial decisions about paying for college, compared to 41% of families without a plan.
  • 45% of planners reported never or rarely being stressed over education expenses, compared to 32% of non-planners.
  • Parents who planned were less likely to be very worried than non-planners about the possibility of loan rates rising (12% vs 29%) or tuition increasing (17% vs. 28%).

Scholarships, Grants Still Largest Resource

Of the average amount families reported paying for college — $23,688 — scholarships and grants funded an average of $8,059, or 34%, the report said. That’s an increase of four percentage points over 2014-15 and represents the largest proportion of any resource used to pay for college in the past five years, according to Sallie Mae.

Parental income and savings averaging $6,867, or 29% of total spending on college, came in as the second largest funding resource. That’s slightly lower than last year’s high of 32%, the report said.

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Chart courtesy of Sallie Mae

Student borrowing was the third most-used resource to pay for college, averaging $3,176, and money borrowed by students paid 13% of all college costs, the survey found — slightly less than the prior year’s 16%.

The survey also found that 90% of families expect their college student to earn at least a bachelor’s degree, including one-third of those students attending community college, and more than half (54%) expected their student to get a graduate degree.

If you’re ready to start saving for your child’s college education, it’s a good idea to educate yourself on the various forms of student loans and the federal aid options that might be available to you and your family — and how those options might impact your finances and your credit. (You can see a summary of your credit report for free on Credit.com to get an idea of where you stand.) The more informed you are, the less worried you may be about affording college expenses.

More on Student Loans:

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