Student debt figures are shocking with impacts that extend into the future. Higher education borrowing has increased incredibly over the past decades, and it is not surprising considering the rising tuition costs and the easy availability of student loans. However, many industries do not keep pace in terms of salary increment making student loan repayment a long process and a heavy burden for the individuals involved.
The truth is, debt impacts the quality of life of students in many ways. Unlike car and home loans, where the borrower knows the exact length of the loan payment and the exact amount, most student loans are usually open-ended.
The stakeholders tend to focus on the loan principal than the payback amount and the interests that continue to build up as the student studies and finds employment. The numbers get increasingly high when a student adds one or two extra semesters to complete their education. David Edwards of Marlin Medical Solutions recently shared some ideas to help reduce the cost of med school.
Repaying a higher education loan is one of the many obligations an individual has to deal with, considering the high costs of higher education. An individual with a higher education loan must juggle mortgage, car payments, credit card bills, etc. Let’s look at some of the long-term impacts of higher education debt.
Deferment of career goals
Entrepreneurship has always been a reliable engine for economic growth and employment, but student loans are one of the hindrances. A report of the Federal Reserve Bank of Philadelphia suggested a correlation between student loan debts and small business formation. 39% of people said that student loans prevented them from achieving their career goals, negatively impacting their plans to start businesses. It also affects the ability of many individuals to give to charity and join charitable organizations.
Delayed home ownership
Another long impact of higher education loans is that it delays homeownership. As earlier mentioned, an individual with a student loan has to juggle many debt payments, including credit card bills. Having a hefty student loan to deal with means you have less than average savings which hardly qualify as the down payment for a new home. Another notable thing is that late homebuyers cannot make up for their home equity with other wealth-building savings. Therefore student loans also affect the housing market in the long term.
Delayed retirement savings
Costly higher education loans make it hard for borrowers to establish savings for a rainy day or retirement. More than 80% of individuals say that student debt obligations are why they are not saving for retirement. The impact is generational in that students end up taking loans to ease up the financial burden on their families, often putting their savings plan on hold.
The constant worry about debt takes an emotional turmoil on an individual’s mental health, leading to poor performance at work. It also impacts relationships and leads to other physical health problems.
The final words
The good news is that many med schools are now offering financial literacy training to their students to address the student debt problem.