Effects of Student Loans on the Masses

A trillion dollars! That’s a lot of money!

It’s actually more than the GDP of over 175 countries of the world. To further put it in perspective, not even Fortune 500 companies can make half of it in a year. In fact, the franchises of all four major NFL teams are worth only 10% of a trillion dollars, combined. And we all know how huge they are!

Why are we raging about this figure? Because a trillion dollars is how much America’s college graduates owe on their student loans affecting their student life. Yes, you read that correctly. The situation is pretty similar in the UK as well. Currently, more than £17 billion is loaned to around 1.3 million students in England. The figure seems to rise with every passing year.

The statement “student loan debt is a crisis” would be an understatement. According to research conducted on student debt, seven out of ten college students have loan debt. What’s problematic is that the loan figure is rising every year, and not only does this hurt the economy, but it also negatively impacts the students.

Here’s how.

Middle-Class Students are Hit Extra Hard

When it comes to students belonging to low-income backgrounds, they are already going through unstable home lives and plenty of obstacles, so the matter of loan debts takes a backseat for them.

However, for middle-class students— whose families have money saved for studies and its easier for them to pursue a degree— student loan becomes a huge challenge for them. If you don’t understand what that means, we’ll let a Dartmouth Sociology professor explain it to you.

According to Professor Jason Houle’s study, “Children from middle-income families make too much money to qualify for student aid packages, but they do not have the financial means to cover the costs of college.”

This means that students from families earning around $40,000 to $59,000 per year accumulated up to 60 percent more debt than lower-income students. This is 280 percent more than their peers whose families earned between $100,000 and $149,000 per year. A similar trend is observed in middle-income families earning up to $99,000 annually.

Sometimes students must take out loans for higher studies, and this is how it affects their lives:

Stress and Illness

Constantly worrying about the repayment of debt can take a toll on a person’s physical and mental health. In a survey of 2018, one in three participants said that student loan debt was a major source of stress for them.

Moreover, 39% of the respondents in another survey said that the financial stress caused by debt was having a negative impact on their health. 35% revealed that it was damaging their close relationships and 26% said it affected their performance at work.

To put it simply, it’s a domino effect. Accumulated student loan debt not only impacts your financial situation, but it also affects several smaller aspects of the students’ life.

Foregoing Grad School

Going to graduate school can make a huge difference when it comes to climbing career levels and a rise in salaries. For students who are indebted with student loans, going to graduate school might not be an option, because they’ll have to look at tuition fees, living expenses, utilities and so much more once again, which they won’t be able to afford.

Taking out another loan is never an option. Therefore, students end up losing some amazing opportunities. While some students might keep graduate school in their future plans, most students end up forgetting about it completely.

Living at Home

Everybody dreams about moving out of their parents’ house and going to college. No one ever thinks about what they’ll do if they have to return living with their old folks after getting done with college. Unfortunately, for a lot of students who have loan debts, this ends up becoming their reality.

Owning a house means, you also have to pay the bills, pay the rent, get the groceries, furnish it, and more. If you’re using all your salary to pay these monthly dues, you’re hardly saving anything to repay the student loan. This is why many students start living at their parents’ once again.

Delay in Marriage and Family

Getting married brings its own share of responsibilities, as it increases the number of people you have to take care of, while you were barely managing it alone yourself.

A study conducted by Pew Research Centre revealed that the average age of marriage for both men and women is now 29 and 27, respectively. In 1960 it was 23 and 20. That’s a big difference and it can be attributed to the inability to repay student loans on time.

The research argues that the odds of women marrying in the first four years after graduating decrease by 2% every month. It also states that women have a much more difficult time repaying debt because—thanks to the glass ceiling— they earn less than men.

People who have student loans delay marriage. However, if they do get married, they delay starting a family or have fewer children so that they can repay their loan debts easily.

Lesser Net Worth

Having a large student debt loan can decrease your overall net worth.

What’s net worth? It’s essentially the value of the assets a person or corporation owns. A study from 2014 published by Pew Research Centre stated that disparities exist between graduates with loan debt and those without.

The research revealed that the average net worth of a household run by an indebted college graduate of under 40 years was $8,700; however, a household run by a college graduate without any student loan debt was $64,700.

Dreams on Hold

Student loan debts are one of the biggest determinants of your standard of living. It affects your financial situation, which, in turn, determines what dreams you can afford to pursue and what you need to put on the back burner or maybe forget about altogether.

If you’re someone who once dreamt about traveling the world or working for a nonprofit organization, it might not be possible to realize these dreams of yours if you have to think about repaying your loans constantly. This might have you thinking about letting go of the job opportunities of your dreams and taking on a career you’re uninterested in just because it offers a higher salary.

Low Credit Score

Having student loan debt lowers your credit score, which means you might not be able to get a loan if you want to buy a car or a house. Not only here, but you might also take a hit when it comes to insurance rates, as insurance carriers also consider credit scores. It might be a little unfair, but student loans are treated as any other type of installment loan by credit bureaus.

The bottom line is that students are taking out student loans without considering the consequences of borrowing that money. Through this article, we want to make sure that they know how it might affect their lives.

This isn’t to say that students should stop taking loans; all they need to do is plan well before they borrow. They need to factor in different things such as the field of graduation and career plans so that they’re able to repay their debts without struggling.

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