[Sung to the tune of Heigh Ho from Snow White & the Seven Dwarfs] “I owe, I owe, so off to work I go…”
Even though I remember singing this refrain in jest, Millennials, the current generation between age 18 – 35 , may not be so light-hearted.
According to Bloomberg News in April 2016:
A new survey conducted online in February by research agency TNS on behalf of Citizens Bank found 59 percent of those [Millennials] polled have “no idea” when they will be able to pay back their student debt.
The survey found millennials, defined as those between the ages of 18 and 35, have an average student debt of $41,286.60. That’s significantly higher than the national average amount of debt for college graduates, which the Department of Education determined is $29,400.
Current student debt totals more than $1.3 Trillion, but estimated to be growing at $2726.03 per second, according to the Federal Reserve Bank.
And, in another survey reported in a separate May 2016 Bloomberg News article, total student debt’s rate of increase may accelerate even more:
A new survey from Discover Financial Services found that 48 percent of parents think their child should pay a portion—or all—of the cost. Four years ago, the same survey found 39 percent of parents held that opinion. That parental piggy bank is shrinking.
Over half of all parents said you’ll have to take out loans, especially if you pursue a degree that’s less likely to lead to a job.
In addition, college-going expectations are still high, which may further propel loan growth:
82 percent of parents surveyed [by Discover Financial Services] still think getting a college degree is important
As much as parents expect their children to pay a portion of college expenses through loans, parents site that, for them:
borrowing is the most common method used to pay for education, with 32 percent of parents saying they would ask the bank for help
Despite seeing loans as a legitimate, plausible means to gaining a college degree, parents remain ignorant of the terms of student loans, and the costs of student debt:
Despite increasing reliance on student borrowing and nightmare tales of unemployed graduates carrying $100,000 or more in debt, a third of all parents don’t seem to know much about what their kids are getting into. The survey found that 8 percent of parents had no idea of the difference between federal and private loans (the latter are generally much more expensive), while 26 percent described themselves as simply “not very knowledgeable.”
Millennial-aged college students are similarly un-informed about their own debts, according to the TNS Survey for Citizens Bank from the April 2016 Bloomberg News reports:
Those polled also had a limited understanding of the intricacies of their student debt. Almost half said they “don’t understand” how privatized student loans work, and 44 percent said they don’t entirely grasp the difference between federal and private student loans. About a third had never even heard of student debt refinancing.
The consequences of student debt are readily apparent in the growing numbers of Millennials living back with mom and dad, delaying marriage and starting a family, as well as increasing defaults on student loans.
Having spent their entire school-aged lives preparing for college, the stark realities of affordability and sky-rocketing college tuition are still being overlooked, as Millennials are applying to college annually rising rates. But, in the 20/20 vision of hindsight:
The majority of millennials said they regret taking out as many loans as they did, but a third took it a step further, saying they wouldn’t have attended college at all had they known the extent of the costs in advance.
As younger generations hear and see their older siblings, cousins, friends suffer under the weight of student debt, the shine of a college education may be dulled. In addition, the reality of student debt may start to erode the life time benefits of a college education. Thus, a cultural shift away from valuing higher education may be foreseeable.