Here is a guest post from Jacob at DollarDiligence.com, who has a personal finance/lifestyle blog. The topic of student loan debt weighs heavily on many of us, and this is a great article that talks about the non-financial toll of student debts. Check it out, and make sure to stop by his blog at DollarDiligence.com and see what else he has to say.
The Non-Financial Impact of Student Debt
The current student loan debt total is over $1.4 trillion as of April 2017, and it’s impossible for a debt total that high to not have staggering ripple effects. In fact, student debt surpasses all other debt types besides mortgages – a full 40 million Americans have student loan obligations. Many are already aware of the financial impact of those obligations on students and their families, but how long do those effects last? More importantly, how does that $1.4 trillion affect other aspects of society?
The Issues Student Loan Debt Causes
It turns out that the effects of student loan debt are a great deal more far-reaching than just a monthly payment, and for far longer than commonly known. A study by American Student Assistance found some disturbing numbers about how student loan debt is ‘delaying life’ for 20- and 30-year-olds. The study showed that 29% of borrowers had to put off getting married and 43% had to forego starting a family.
Those numbers are reflected in the lowest birth rate in American history. According to the Pew Research Center, women of childbearing age are having children at a rate of only 63 per 1000 women; compare that to the rate of the 1950s baby boom, almost twice that number. While many factors are part of the equation, the biggest factor in that falling birth rate is student loan debt – many college graduates simply cannot afford the added expense of children.
Chris Christopher, the senior economist at HIS Global Insight, says this may be the “new normal” if student continue to borrow large amounts of money to pay for educations and the costs of college keep rising at current rates.
That lower birth rate has ramifications of its own. The U.S. Social Security program, for instance, is completely dependent on younger generations contributing to the coffers and replenishing the benefits taken out by the elderly. With less babies being born, that results in a smaller contributing workforce, rendering the entire Social Security program unsustainable. The same is true for the national deficit; less workers means less tax revenue – and less available money for everything from social programs to national defense.
Student Loan Debt and the Job Market
The job market is also affected by student loan debt. Labor analytics firm Burning Glass performed a study in 2014 that found 68% of management job postings and 60% of computer and math-related jobs required a bachelor’s degree – but only slightly over half of employees already in those fields already had one. The study concluded that so-called “middle-skill career pathways” are being closed off to anyone without a degree – seemingly forcing many into getting a high-priced college education and the long-term debt that goes with it.
Employees with a bachelor degree tend to make up to 60% more than their less-educated counterparts, and in a society where the cost of living continues to rise, students are hoping to land a job after college that allows them to keep up.
What Students Can Do
The flip side of that, however, is that students can look for schools that won’t break their bank or plunge them into exorbitant amounts of debt – sometimes leading to students receiving degrees from colleges that, while cheaper than a big-name school, lack the level of accreditation that employers are looking for.
Meanwhile, professional degrees in fields like law or medicine are becoming cost-prohibitive for many students. The thought of graduating with a student loan debt often topping $150,000 – and a monthly payment over $800 – is a daunting prospect. Some states like New Jersey are finding that their new doctors aren’t putting down roots after they graduate – they’re leaving to find jobs with better student loan repayment. Baby boomers are well into their retirement years as well, and there are less doctors to care for them.
Some students who are making their payments and managing to achieve some financial success are finding that their credit and quality of life are still being threatened, by the very companies who are supposed to be helping them. Students all over the country were left with nearly no recourse in January 2017 when loan servicer Navient was found to be overcharging student borrowers and illegally cheating them. Navient is the nation’s largest student loan servicers – working with the Department of Education and the majority of private student loan companies.
The staggering student loan debt in the United States is affecting much more than just the personal finances of students and their families. As the debt continues to rise, it will continue to reach its tentacles into all facets of American society. While the federal government has established more programs to help students with their debt, it’s not enough – and the ripple effects continue.
Jacob runs his own personal finance blog over at Dollar Diligence. Through meticulously watching his money and extreme frugality, he was able to pay down over $25k in student loan debt in just 15 months. You can learn more about his story and follow him here.