Student Loan Debt and Its Impact on Financial Goals

A college degree is often pushed as the ticket to a better life. However, affording the college price tag can be challenging; many students need loans (both federal and private) to cover their costs. The cost of those loans is more than just financial, as many student loan borrowers say that their educational debt has impacted their ability to reach their financial and life goals.

How Student Loan Debt Impacts Financial Milestones

According to the College Board, 55% of bachelor’s degree recipients from public and private nonprofit four-year colleges and universities graduating in 2019–20 had student loans. Those with student loans might be putting off important financial and life milestones, due to the fact that they must also grapple with their educational debt.

Earlier this year, CNBC released the results of a poll indicating that 81% of respondents had delayed financial milestones due to their student loan debt. Some of the milestones that respondents said they weren't reaching include:

• Investing money (40%)
• Saving for retirement (38%)
• Buying a home (33%)
• Having a baby (16%)
• Getting married (14%)

Other data also points to the fact that student loans are impacting the housing market. According to research published by the Federal Reserve, each 10% increase in student loan debt from 1997 to 2010 resulted in a 1–2 percentage point drop in the homeownership rate for borrowers within the first five years after leaving school.

The financial future of student loan borrowers is also often less certain than those who didn't borrow. Using data from the National Longitudinal Survey of Youth 1997 Cohort, the Center for Retirement Research at Boston College found that those with student loans had approximately half as much in retirement assets as those who graduated without student loan debt.

Is Student Loan Debt Worth It?

After considering how student loan debt can impact a borrower's life, it's not surprising the CNBC poll found that 54% of adults with student loans said they weren't worth the cost.

The impact was even more profound for borrowers earning less money. Among those making less than $50,000 annually, 61% of respondents said their student debt wasn't worth it. In groups that made more money, however, student loans were more likely to be considered worth the cost. For example, 54% of borrowers who made $50,000 to $99,999 annually said student loans weren't worth it, whereas 59% of borrowers who made more than $100,000 did consider their student loans worth taking on student debt.

Less Debt Means More Options

Ultimately, the ability to complete school with less student loan debt grants borrowers more options. Data from the United States Census Bureau indicates that there remain racial and gender gaps among those who have student loan debt. One of the reasons President Biden gave for his student loan forgiveness plan (which is currently suspended) is that it could potentially unlock the economic potential of millions of borrowers.

Those with less student loan debt are more likely to start businesses, buy homes, and move forward with their lives. Conversely, those who feel burdened with student loan debt are more likely to believe they have fewer options and feel stuck.