How stressful is student debt?
Depression and anxiety can lead to self-imposed isolation. More than 74 percent of respondents reported shutting other people out of their lives often due to their student loan debt stress. In their own words: “I avoid doing things with friends and family because I don't want them to know how broke I am.”
Key Takeaways. Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.
There's a strong link between debt and poor mental health. People with debt are more likely to face common mental health issues, such as prolonged stress, depression, and anxiety. Debt can affect your physical well-being, too. This is especially true if the stigma of debt is keeping you from asking for help.
Some ways to manage student loan debt include paying more than your minimum monthly payment, sticking to a budget, consolidating or refinancing your loans, looking into loan forgiveness, and exploring different payment programs.
Despite their qualifications, grads often have to settle for lower-paying, lower-skill jobs just so they can start paying their loan bills right away. As a result, graduates in debt often miss out on the benefits that come with a degree.
Black and African American student borrowers are the most likely to struggle financially due to student loan debt making monthly payments of $250. Asian college graduates are the fastest to repay their loan debt and the most likely to earn a salary that exceeds their student loan debt balance.
Although most college students take out student loans, women and people of color are more likely to have student loan debt—and higher balances—than their white male counterparts.
Americans own $1.77 trillion in federal and private student loan debt as of the second quarter of 2023. That's up 1.25% from the second quarter of 2022. $128.77 billion of that total through March 31, 2023, is private student loan debt.
At the end of 2022, the Federal Reserve reported that roughly 43.5 million Americans have student loan debt, which totals over $1.7 trillion. Each borrower owes an average of $37,787.
Many students say they prefer "just not to think about it" because adding money stress to their academic stress is overwhelming. While that's an understandable reaction, research shows that hiding from debt can be associated with bad financial decision-making and mental health problems.
Should you stress about debt?
It's not that you shouldn't be concerned about carrying debt. Sometimes, feeling stressed can serve as a motivator toward becoming debt-free. But if you aren't overspending or being irresponsible with your money, you shouldn't feel like you have to constantly berate yourself over your bills.
- Understand what makes student loans unique.
- Take control of your loans.
- Save yourself time and money.
- Stay on track with income-driven repayment (IDR)
- Get an IDR plan for Parent PLUS Loans.
Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones. ED will continue to discharge loans as borrowers reach the required number of months for forgiveness.
Pay in installments rather than loans
Most colleges offer installment plans that are interest-free and might have only a small fee. Choosing to pay in installments rather than by loan can help avoid debt. Paying in installments is paying in portions rather than having to pay it all at once.
Key Takeaways. Student debt is money borrowed by individuals to cover the cost of education. Loans can come from private or federally funded sources. Debt can be incurred to cover tuition, textbooks, miscellaneous fees, and room and board.
Student loan balances can have a significant impact on the economy because they prevent borrowers from moving forward with other financial plans such as buying a home or a car. Student loan debt hinders spending by limiting the amount of free cash in consumers' pockets.
Regardless, one rule of thumb for student debt is that you should try not to borrow more than the first year salary you can expect in your chosen field. This means that if you expect to earn $38,000 in the first year of your career, you should try to borrow $38,000 or less for your degree.
- Understand what makes student loans unique.
- Take control of your loans.
- Save yourself time and money.
- Stay on track with income-driven repayment (IDR)
- Get an IDR plan for Parent PLUS Loans.
There's a general rule floating around stating that your total student loan balance should not exceed your expected starting salary out of college. So if, based on your desired profession, you anticipate making $50,000 your first year after college, you wouldn't want your student loan balance to exceed $50,000.
ELVTR's higher education study found that most (54%) have experienced mental health issues brought on by their student debt.
How bad is the student debt crisis?
As of March 2023, about forty-four million U.S. borrowers collectively owed more than $1.6 trillion in federal student loans. Additional private loans bring that total to above $1.7 trillion, surpassing auto loans and credit card debt. Only home mortgage debt, at about $12 trillion, is larger.
But if you can get your head around the fact that your student loan is not real debt, you should start feeling better about it. As Martin Lewis (Money Saving Expert) explains in this article, it is more like a graduate tax or 'contribution'. Think of it as an investment in your future.
With careful planning, student debt is worth it
But the data clearly show that incurring a carefully calculated amount of student debt to earn a marketable degree and enter a well-compensated, in-demand profession is very likely to pay off. In the end, it's a personal choice.
Only a small percentage—about 6% of borrowers—owe $100,000 or more. Nationally, the average student loan balance per borrower is $39,032, so if you have $100,000 in student loan debt, you have about 2.5 times the national average balance.
If you're a recent college graduate with a mountain of student loan debt — say $100,000 or more — paying off such a large amount could be a major struggle.
