Americans don’t do enough homework about college costs and how to cover them.
The result is $1.4 trillion in student loan debt, the fastest-growing type of household debt. It now accounts for about a third of non-housing-related debt.
And there are many more grim statistics where those came from, raising tough questions for families.
The toll of heavy student debt
While a college education can help ensure — but not guarantee — career success, the rising student loan debt load takes a toll on millennials’ ability to achieve financial goals in a timely fashion.
“For some millennials, the American Dream seems to be more of a nightmare as many struggle to achieve life goals like getting married, buying homes and starting families,” says Paul Golden, a spokesman for the National Endowment for Financial Education.
Older generations also are juggling student loan payments, left over from either their own time in school or that of their children.
According a recent report from the credit reporting bureau Experian, 13 percent of U.S. consumers have one or more student loans on their credit file, with average total debt of more than $34,000 per person. It also finds that one-third of student loan borrowers are not currently repaying all of their loans.
Furthermore, the National Association of Realtors reports:
- 61% of student debtors have had difficulty contributing to retirement accounts
- 32% are able to save for retirement, but at a reduced amount.
- If student loan borrowers were free of that debt, most would be putting that money toward long-term savings, investments, or a home purchase.
The newest debtors
Soon, the first payments will come due for the college Class of 2017; graduates typically get a six-month grace period before they have to start paying off student loans.
The nonprofit Institute for College Access and Success, which just finished tallying the debt loads among last year’s graduating class.
New Hampshire residents had the most student loan debt at graduation in 2016, averaging $36,367. Close behind were Pennsylvania, Connecticut, Delaware and Minnesota.
Higher-debt states were mostly in the Northeast and Midwest. Lower student-loan-debt states were primarily in the West.
Report co-author Debbie Cochrane says the main takeaway is this: “We need to make college more affordable and reduce burdensome debt, while giving students and policymakers the information they need to make wise decisions and investments.”
That means parents and students need to be smart consumers when choosing where to study and how to pay for college. Questions for families to consider include: Can you save more for higher education? Can you resist taking on so much debt? Can you explore less expensive schools?
College and university tuitions are continuing to rise at a much steeper pace than inflation overall. With wage gains still mostly lackluster, many Americans may decide that they have to make up the difference by taking on more debt. Others may skip college altogether because the cost is just too high.