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Student loan debt has caused most borrowers to put off major life events such as buying a home or getting married, a recent study found.
According to the Lumina Foundation-Gallup 2024 State of Higher Education study, which was released Wednesday, 71% of all currently enrolled college students or previously enrolled students who stopped out of their program before completing it say they have delayed at least one major life event because of their student loans.
The study found that among previously enrolled students, 35% say their loans have kept them from re-enrolling in a postsecondary program and finishing their degree.
Graphic explainer:How are college costs adding up these days and how much has tuition risen?
Purchasing a home tops list of delayed events
Purchasing a home is the most commonly delayed event, named by 29% of borrowers, while buying a car, moving out of their parents’ home and starting their own business followed closely behind. Fifteen percent of those borrowers also report they have delayed having children because of student loans and another 13% have delayed getting married, the study found.
Demographics of those delaying life events
According to the study, male borrowers are slightly more likely than female borrowers (76% vs. 64%, respectively) to report they have delayed a major life event due to loans.
Delay rates are also slightly higher for 26- to 35-year-old borrowers (77%), “likely because they have entered a life stage in which these events are more relevant than for younger borrowers and because they generally have higher amounts of student loans than their older peers,” the study found.
The amount of student loan debt is also a factor in the delaying of major life events. The study found that “borrowers with higher amounts of student loan debt are far more likely than those borrowing lesser amounts to say they have delayed purchasing a home, buying a car, moving out of their parents’ home or another major life event.”
More than nine in 10 of those who have borrowed at least $60,000 in student loans say they have delayed one or more major life event, according to the study.
However, even relatively modest student loan amounts were found to have an impact, as 63% of those who have borrowed less than $10,000 say they have delayed major live events.
How the study was conducted
The study was conducted from Oct. 9 to Nov. 16, 2023, via a web survey with over 14,000 current and prospective college students. Included among those were over 6,000 students enrolled in a post-high school education program, over 5,000 adults not currently enrolled with some college but no degree, and over 3,000 adults who had never been enrolled in a postsecondary school or program.
Student loan relief:Biden announced $7.4 billion in student loan relief. Here’s how that looks in your state
President Biden announced $7.4 billion in student loan relief last week
President Joe Biden announced another batch of student loan forgiveness last Friday for 277,000 borrowers. The canceled debt adds up to $7.4 billion.
Most of those borrowers signed up for the president’s signature income-driven repayment plan – Saving on a Valuable Education, or SAVE. Through SAVE, people who originally borrowed a small amount ($12,000 or less) and have been paying it off for at least a decade are eligible for relief.
Others affected are 65,700 borrowers participating through other income-driven plans who should have qualified for relief but did not because their loan servicers wrongfully put them into forbearance. Fixes to those plans account for nearly half of the loans forgiven in the announcement Friday.
The final bucket includes a few thousand borrowers participating in Public Service Loan Forgiveness, which relieves the loans for people working in government jobs or positions that give back to the community. Biden has been working to fix various administrative problems that have long plagued the program, and the discharges announced Friday are the result of one such adjustment.
The latest batch of student loan debt relief brings the total amount forgiven under Biden to $153 billion. In all, the administration says nearly 4.3 million Americans have had their student loans relieved thanks to its actions. That works out to about 1 in 10 federal borrowers who’ve been approved for relief.
Student Loan Borrowers and Delayed Life Events
The investment in education has been considered as the most important way of obtaining a good job and climbing to a higher socioeconomic level. Today, education is quite expensive due to high tuition fees, living expenses, and other costs. Therefore, numerous borrowers take out student loans in order to make an investment in their education and their future.
Student loans usually represent a good investment in the borrower’s future. In the long run, individuals with a college degree usually have higher income compared to those who have only a high school diploma. However, various drawbacks from borrowing student loans can hinder social and economic mobility for the borrowers. So much so, that it has recently been stated that student loans have the potential to hinder the American Dream.
One of the most prevalent issues with student loan borrowing and the achievement of the American Dream is student loan default. Defaulting on student loans has severe consequences that can last a lifetime. While student loans are debt that cannot be shaken in a bankruptcy, the harsh consequences that defaulters receive can make student loan debt a black hole from which there is no coming back. Defaulting on student loans can hinder the borrower’s ability to obtain employment, damage their credit which affects future purchases like a home or car, and ruin their eligibility for student aid in the future.Most student loan borrowers have delayed major life events due to debt, recent poll says
Defaulting on student loans will surely be a setback on the road to achieving the American Dream. Default prevention is possible, albeit not as easy as one might think. An essential proactive step in preventing student loan defaults takes place before the borrower has even taken out the student loan. Pre-borrowing financial literacy/counseling and the utilization of wage of future income as a means to compare price and quality of educational institutions are the primary prevention methods cited in the literature. Programs like these mainly target students who are determined to utilize student loans to finance their education and are at high risk for student loan default.
Overview of the Student Loan Debt Crisis
The effects of this exponential growth in student debt are felt in multiple domains. Young adults are increasingly delaying home ownership. Home ownership has historically been an important means of wealth accumulation and upward mobility in the United States, with a home representing the largest asset for the median household. Entry into home ownership has been a key life transition event for young adults. However, the percentage of 18 to 34-year-old renters increased from 2012 to 2016, with college debt being cited as an important factor for this shift.
The student loan debt crisis has received growing attention over the past two decades, with numerous studies documenting its short and long-term negative effects on the US economy. As college enrollment has increased and state funding for higher education has declined, reliance on student loans to finance postsecondary education has grown across all income and age groups. In 1980, 45% of young-adult households had college debt. By 2003, this had increased to 56%.
Recent federal policy has aimed to increase access to higher education through initiatives such as increasing the maximum Pell grant award. However, these efforts are outweighed by trends in the larger funding context, as evidenced by the declining value of Pell grants relative to college costs and the shift in emphasis from grants to loans as the primary vehicle for student aid. This has created a debt for diploma system in which access to an increasingly underfunded public higher education system is mediated by assuming unsustainable levels of educational debt. In 2012, 71% of bachelor’s degree recipients graduated with a student loan, with an average debt of $29,400. This represents a 56% increase in the number of graduates with debt from 2000, with an inflation-adjusted increase in average debt of 44%.
Impact of Student Loan Debt on Borrowers
Another negative impact of increasing student loan debt is the effect that it has on the timing of major life events, such as buying a car, getting married, and having children. According to one study, each additional $1,000 in student loan debt decreases the likelihood of a person being married by 2 percent. Also, it was found that for each year increase in age of a person with student loans, there was a corresponding decrease in the likelihood of that person having children. This suggests that people are delaying major life events until their student loan debt has been paid down.
First, data from the Department of Education suggests that the net worth of the median borrower holding student loans declined 34 percent between 1992 and 2008, from $108,100 to $71,500 (in 2008 dollars). During this same period, the median borrowers without student loans saw their net worth increase from $86,500 to $93,900, a 9 percent increase. Declines in net worth of borrowers are attributed to the fact that student loan borrowers accumulate less wealth and assets other than debt, including home and other forms of real estate. This is largely due to the fact that student loan borrowers are likely to be deterred from using debt to purchase homes and other large assets until their student loan debt has been paid off.
As a result of the increasing costs of higher education, today’s college and university students find it necessary to rely on educational loans to pay tuition and other education-related expenses. In recent years, these increases have led to a large number of students with considerable amounts of educational debt upon graduation.Most student loan borrowers have delayed major life events due to debt, recent poll says
According to a report by the National Center for Education Statistics, in 1997-98, about 46% of postsecondary students took on some form of educational debt, averaging about $6,600. By 2007, that figure had increased to 53% of students at 4-year institutions and 54% of students at 2-year institutions. The average amount of debt for those students who were in repayment status was $20,100. More recent data suggests that these amounts have continued to increase. Unfortunately, this trend of increasing borrowing has a number of negative implications for borrowers.