The impacts of the student loan debt crisis you might not have considered
By Laurie Farros
You might not know this, but the Biden administration has quietly canceled about $17 billion in student loan debt in the past year. Most of that has gone to targeted categories of borrowers, including the disabled, those defrauded by for-profit institutions, and people working in public service.
Although $17 billion seems like a lot of money—and it is—that figure represents only about one percent of all student loan debt. The Student Debt Crisis Center estimates that 45 million Americans owe more than $1.7 trillion dollars. And while the president hasn’t taken broader debt forgiveness off the table, too many Americans have put off their American dreams while struggling to pay off often crushing debts.
Givling recently surveyed 1,622 Americans across the U.S. to better understand their attitudes toward their student loan debt, including consequences, impacts, and regrets. Their answers offer both a window into the current debt crisis and insight into how we might alleviate the problem moving forward.
The debt crisis is creating generational loss.
The scale of the student loan debt crisis can make it hard to understand the impact on individual Americans. Over 27 percent of the people we surveyed currently have between $35,001–$70,000 in student loan debt. Another 18 percent are carrying between $15,001–$35,000 in debt. Sixteen percent have over $100,000 in debt. Only about 17.5 percent currently held no debt.
That $15,000, $45,000, or even $100,000 represents a lost down payment on a house, 401Ks unfunded, and vacations untaken. It represents golden handcuffs for people trapped in jobs they don’t like and young people living at home because they can’t afford to rent.
Our survey results bear this out. A whopping 28 percent of those surveyed said that student loan debt has forced them to postpone purchasing a house. Over 11 percent are stuck in a career they don’t like while almost 10 percent have put off having a family. In addition, 22 percent of all respondents said that their student loan debt has affected their mental health. The impact on people’s health is a troubling, underreported problem that deserves far more attention.
The underrecognized cost of higher education.
One reason for the mental health challenges is doubtless stress—and with the size of the debt many Americans are carrying, it’s no surprise that they’re struggling. But could this crisis have been avoided—and what might help future generations avoid similar debt?
Our survey suggests one path forward: more financial education and better financial literacy. S&P’s Global Financial Literacy Survey measures financial literacy in four areas: basic numeracy, interest compounding, inflation, and risk diversification.
Asked about their biggest financial regret when it comes to student debt, over 45% (approximately 23 percent each) of our survey respondents said they either did not understand the true cost of their choice or wished they would have been more educated on loans and interest rates. Another 15 percent said they did not understand how long they would be carrying their debt.
Indeed, a FINRA study found “signs of persistent or widening divides between those who are struggling financially and those who are prospering.” They also found many of the same trends our survey revealed, including financial anxiety, college debt remorse, and that “financial education matters.”
While we can’t educate our way out of the current student loan crisis, it is imperative that we pay more attention both to the hidden costs of this epidemic of debt and to how we can educate future generations—both financially and more broadly—without leaving them struggling well into adulthood and deferring their American dreams.
Laurie Farros is the president of Givling, the patented crowdfunding trivia game that helps users eliminate debt.