Growing student debt is seriously impacting young adults’ prospects
The student loans system was designed to help increase social mobility. Borrowing to cover the cost of education played a crucial role in enabling generations of people to study without necessarily having the private means to cover the entire cost. However, we have now got to a stage where the level of debt on graduation is becoming a serious impediment to the lives of graduates and the true cost of being a student could be higher than expected.
This is the case, not just for the big purchases we all want to make later in life, but even for some of the smaller and more frequent costs too. For example, 27% of people say that they find it difficult to buy daily necessities because of their student debt. 73% have had to put off saving for retirement or saving for other investments as a result of the level of debt that they have.
Graduating with student debts and entering the working world
There are a number of different ways in which graduating with a large volume of debt is beginning to hold people back. These are just a few of them:
It affects career choices
If you graduate with an intimidating student debt then your first instinct is likely to be to start trying to pay it off. This results in many more graduates going into careers they would not necessarily have chosen were it not for the fact that they have debts to pay off. In some cases, due to difficulties getting a job, it’s necessary for someone to take a job for which they’re vastly over qualified – so, not even using the qualification that they have incurred the debt to obtain.
The impact of doing a job “just for the money”
On an individual level this can lead to restlessness and dissatisfaction for an employee. However, the impact goes far further than that, as employers may be faced with a significant proportion of their workforce that doesn’t really want to be there. This may seem fairly inconsequential in the long run. However, workers spend roughly 14 million working hours per week looking for a job. The cost of that, financially (in terms of the consequent drop in productivity), is $400 million a year.
The talent drain from public sector jobs
We need graduates to enter the public sector in order to maintain infrastructure and services. However, rates of pay are just not the same for a public sector job as those in the private sector that are higher paid. As a result, whether or not a graduate would actually prefer to work in the public sector, they are nevertheless driven towards higher paid roles outside of it to get out from underneath the debt burden.
No room for creativity
Start-ups are usually bootstrapped; creativity rarely comes from a place of money. However, as graduates are increasingly forced to go into jobs for the cash to ensure they can meet debt repayments, entrepreneurial spirit and creativity in general are being seriously squeezed.
The effect on significant life choices
It’s not just in the context of work that graduating with significant debts is impacting on former students. Many also find themselves completely unable to start striving for the life goals that older generations have taken for granted.
Getting on the housing ladder
Research shows that those who have student debt are statistically less likely to enter the housing market in their 30s than those without. Student loans are described as “the new mortgage” for younger generations and are so onerous that buying in to the housing market doesn’t even feature as a future plan for many. 75% say that having student loans has impacted on their ability to buy a home.
Getting married and having children
On average, we are getting married six years later now than we were in 1965. And while there are many more reasons for this than purely student debt there’s no doubt that high levels of debt have a big impact on whether or not we are able to go ahead with these kinds of big plans.
Why? Well because weddings cost money and kids cost money. Psychologically, the ongoing burden of student debt has had the knock on effect that many people don’t feel ready to get married because they are still effectively attached to their student experience.
The need to repay student debt and meet loan obligations is so pressing that many people rate it above planning financially for the future. Many of us are already moving through life without any pension planning or retirement savings in place. And those with student debts are even less likely to have the spare income to start putting cash aside at the stage of life when this needs to happen. 73% have put off saving for retirement as a result of student loans.
This not only has an impact on the individual but could affect society much more broadly too. Future generations of retirees who simply don’t have enough money put aside to pay for their own retirements as a result of the debt they incurred as students could become a serious burden to others.
Living life day to day
For many people, the burden of student loans means that it’s more difficult to cover day-to-day costs and expenses. It also makes it harder to plan for short-term financial goals, such as a holiday or a new suit for a job interview. The result may be that graduates have no choice but to take on more loans to meet immediate needs, which could create a situation of completely unmanageable debt.
Why it’s a good idea to pay off your student debt more quickly
- You’ll find it easier to live within your means
- You’ll be better able to plan for your financial future
- You might well feel better about yourself and more positive about the future
- You will pay less interest if you pay your student debts off more quickly
- Life is easier without the burden of student debts hanging over you