Is Student Loan Debt Changing Grads’ Lifestyle Choices?

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studentloandebt“Other than rent and, later, my mortgage, my student loans were my largest monthly expense through my twenties,” says Emily Guy Birken, a freelance writer and author of The Five Years Before You Retire.

Because of her student debt level, Guy Birken put off some of the funding for her retirement. She also sacrificed travel opportunities and even a career opportunity because her student loan payments meant that she couldn’t afford the costs.

After seven years of concentrated effort, Guy Birken was able to pay off $33,000 in student loans in 2013. However, her $33,000 included a stint at grad school, earning a master’s degree.

Today’s graduates aren’t so lucky.

According to Mark Kantrowitz, the publisher of, a group of web sites that focuses on paying for college, an analysis of government debt reveals that the Class of 2014 is the most indebted ever. The average student loan debt is $33,000 after finishing four years of school.

This growing level of debt is becoming a major factor in Millennials putting off some of the life milestones that we have long associated with adulthood. In fact, high levels of debt might be one of the reasons that Millennials are often called the “Boomerang Generation.”

Necessary Debt?

All of this student debt seems necessary, since the cost of a higher education continues to rise. Without taking out student loans, many young adults wouldn’t be able to afford college. This is increasingly the case for middle class students. Some of those on the bottom rung of the economic ladder can qualify for grants and other aid. However, there is a growing number of students who don’t qualify for such help, but who still can’t afford rising college costs.

Guy Birken agrees that sometimes you feel as though you are taking logical steps along the way. “I didn’t exactly second-guess my decisions,” she says. “Every single one made sense at the time that I made it.”

The main problem, though, is that once many students graduate, they find themselves unable to find a job. Guy Birken had her own struggle to find a job after completing her master’s degree. Her degree was meant to help her find a better teaching job. “I was under the impression that teaching was a recession-proof profession, but that was definitely not the case.”

She had the stress of student loans while trying to find a job. “It looked for a while that I would not be able to find a teaching job,” Guy Birken says. “I was hired a mere two weeks before the beginning of the school, and many of my classmates in my cohort of 35 were not as lucky.”

After taking all of the “right” steps to get a higher education, and believing that a job after graduation would provide the means to make student loan payments, many of today’s graduates are bound to be disappointed — and alter their life plans as a result.

Putting Off Lifecycle Events

“If total student loan debt at graduation is less than the annual starting salary, the borrower can repay his or her student loans in 10 years or less,” says Kantrowitz. “If total student loan debt exceeds annual income, the borrower will struggle to make the loan payments and may need an alternate payment plan, such as extended repayment or income-based repayment, to make the monthly loan payments.”

There are government programs that can help students consolidate their debt, or get on an affordable payment plan based on income. However, these programs can result in being in debt for 25 years instead of 10, and mean that more is paid in interest. Other options, like deferment and forbearance, are available for students who can prove that they are experiencing financial hardship. But these solutions come with their own pitfalls, including paying more interest over time.

Higher student debt for graduates doesn’t just impact their long-term financial prospects. It can also lead to the delay of milestones that we, as a society, often view as important in the lifecycle. “Generally, students who graduate with too much debt tend to delay lifecycle events such as buying a car, buying a house, getting married, having children, saving for retirement, and saving for their children’s college educations,” Kantrowitz says.

Instead of getting married and buying a home, many Millennials put off marriage and move back with their parents. Additionally, other consumer spending, such as buying cars, might be avoided. In an economy that relies heavily on consumer spending, the fact that rising student debt is impacting spending habits could lead to a wider economic problem.

Right now, despite the more than $1 trillion in outstanding student loan debt, we aren’t quite at a tipping point. However, that could change. “Most students graduate with a reasonable amount of debt,” Kantrowitz says. “Average debt at graduation for a bachelor’s degree is about $33,000. Average starting salary is about $45,000. But these are averages. Some students borrow more and earn less, and run into trouble as a result.”

Another problem is that the labor market still hasn’t recovered from the recent shock. The average starting salary might be $45,000, but you have to be able to find a job in order to earn that.

In order to avoid the problems that come with putting off lifecycle events due to student loan debt, it makes sense to do what is possible toward avoiding a high amount of student loan debt. Save up now, and look for cost-effective universities and degrees.

“The best advice is to keep student loan debt in sync with income,” says Kantrowitz. “Live like a student while you’re in school so you don’t have to live like a student after you graduate.”