The State of Student Debt
- More than 70 percent of college graduates have outstanding student loans—with an average balance of $37,000—when they graduate.
- Studies show millennials are far more concerned about paying off student debt and increasing their savings than they are about their retirement.
- The sooner you can pay off student debt, the sooner you can start your adult financial life and wealth-accumulation years.
The other day I was interviewing Danielle, a 28-year-old woman I know, about her student debt. When I arrived, she had just finished crying because once again she had gotten off the phone with a debt collector who’d been pestering her to make a payment on her student loan debt. Her debt is so large that it’s like making a home loan or rental payment with her $160,000 of debt accumulated over four years of college. Not fun at all!
What are the real facts about student debt?
- It has risen more than fivefold over the past dozen years, to $1.3 trillion from $250 billion in 2004. To put that $1.3 trillion into perspective, auto loans and credit cards have been holding steady at around $1 trillion for the past decade. Student debt passed auto loans and credit card debt in 2010.
- According to a 2015 Federal Reserve study, 27 percent of federal student loans were delinquent—essentially doubling since 2005.
- There are about 43 million people holding student debt of some type today.
- In 2012, nearly three quarters (71 percent) of graduates of a four-year program came out of school with student debt.
- In 2016, the average amount of student debt upon graduation is around $37,000.
Putting that $37,000 in perspective, it’s like buying an extra car. Payments over 10 years run around $400 a month. It’s like having two separate car payments for the average person. That’s huge!
Facebook did a study in January 2016 of 27,000 of its subscribers. The millennials who responded said they had two priorities:
- Pay down debt (43% agreed).
- Increase savings (38% agreed).
How about retirement savings? Only 10 percent of millennial respondents cited retirement savings as a priority.
Here’s the bottom line: Over the next decade, millennials are really going to need to focus on paying down their student debt. Danielle and millions of folks like her are going to be mightily stretched to try to accomplish that.
Until next time, enjoy.
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Gary Klaben is in our Glenview, IL office and serves our clients who are now located all over the country. He has over 30 years of experience and is the author of Changing the Conversation, The Wealth Sanctuary and co-author of The Business Battlefield. Whether advising his clients, mentoring his team, or coaching entrepreneurs, he is always simplifying complexity and motivating others to take the next action that’s right for them
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