According to a recent study, about 42% of millennials have college debt. Although student loans are meant to be financial aid, the effects on the lives of millennials have made it a thing of fierce debate.
The average college debt per student is around $30,000. In a society that’s run on credit, starting your adult life owing so much money isn’t ideal.
It’s not all bad, though. Organizations like Elfi offer college graduates the opportunity to refinance their student loans to make payments less cumbersome.
However, millennials are still facing critical challenges stemming from the high amount of college debt they owe. Here are some of these challenges:
1. They are likely to have lower credit ratings.
As noted earlier, American society runs on a credit system. Coincidentally, college debt has a significant effect on a person’s credit rating.
Considering that most people don’t have a firm grasp of their college debts and when the payments start, they’re very likely to default payments. Apart from the financial repercussions of defaulting a payment, credit ratings also suffer.
Seeing as most millennials struggle to get their adult lives together initially, a lot of them end up missing out on payments either through oversight or inability to pay.
2. Millennials own less property.
Another by-effect of the student loan is that millennials own the least property of any generation. A 2015 survey showed that millennials believed student loan was the biggest hindrance to them owning property. Many of them struggle to save enough to meet up with the minimum downpayment requirements that most mortgage lenders require.
Another survey showed that almost 14 million young adults still live with their parents. This may be an indication of something worse – that millennials aren’t making enough to even afford rent.
3. Millennials hold less wealth.
A report from the federal reserve revealed that millennials account for just 5% of the national wealth. While this may seem like a reasonable statistic seeing as most millennials are young and just began earning, it’s an indicator of something more profound. For comparison, baby boomers, when around the same age, held over 20% of the economy.
Higher student debts result in lower credit ratings and an inability to own property. As everyone knows, owning property is one of the best ways to grow wealth. Of course, the statistic is expected to even out over time as more millennials go up the corporate ladder. However, the signs are troubling.
The results of this imply that many millennials may not be ableto live the lives of their dreams, or attain as high a quality of life as other age groups.
It’s quite evident that millennials in America are dealing with more financial pressure than other generations before them. This means they will have to be creative about the solutions they bring to the table.
If you’re already in the student loan debt system, there’s still a lot you can do for yourself. Make sure to contact your loan officer or any other relevant professional to help you plan a less stressful payment plan.