Photo: Shutterstock; Illustration: Joseph Lin / Ladders
Graduating from college is supposed to be an achievement that unlocks the potential of your professional career. After receiving your diploma in May, having a college education is supposed to welcome the challenges and excitement of adulthood, the first steps toward your first real job that’ll act as the springboard to push — and excel — you beyond what one might think is possible in your ascent into adulthood.
At least that’s how it was sold, until reality hits: student loan debt and repayment.
There might be a grace period after graduating where you can still pretend that thousands and thousands of dollars of debt aren’t waiting for you, but it is — and you’re not alone. America is deep in a student debt crisis, with Americans owing about $1.5 trillion in student loans as of March 2019, a number that has doubled compared to what Americans owed just a decade ago.
With education costs climbings and workforce salaries paying less and less, student loan debt is hindering America’s youth in ways that affect them both at work and in their personal life.
From the Pew Research Center, here are the quick facts regarding America’s student debt crisis:
- Americans owed about $1.5 trillion in student loans.
- About one-third of adults under 30 have student loan debt.
- Young graduates with student loans are more likely to struggle financially than those without loans.
Shocking? Or expected?
A recent survey by LendingTree found that nearly eight of 10 Americans said their student loan debt hindered their life in some significant way like putting off opportunities to travel, change careers, and even start a family. Student loan debt has 46% of Americans regretting how much they borrowed and 46% of Americans regretting the education they pursued in college.
As for what loan borrowers are putting off, seeing new places was the most popular answer amongst respondents. Forty-four percent of respondents said student loan payments have kept them from new experiences in the last year, followed by saving for retirement (31%) and missing out on opportunities to go out with friends (30%).
Student debt is so suffocating that four in five graduates with student loans view their debt as a life sentence, according to a separate OnePoll study that found 89% of graduates see their debt as a financial burden. This study, which polled 1,000 undergraduates and 1,000 postgraduate degree holders, found that debt holders are so bogged down with their debt that they are getting side hustles (39%), seriously budgeting (38%), and even sacrificing their career to take a job they don’t enjoy but pays well (36%).
If this sounds familiar, there are steps you can take to righting the debt ship and finding something that works for you.
The biggest mistakes borrowers can make
Shann Grewal, VP of IonTution, a company designed to help college students and alumni best manage their student loan repayment, said one of the biggest mistakes borrows can make is going on auto-pilot when the student becomes a borrower in college.
“One of the things that we stress early on is, if you’re capable of making the payment even during those periods of non-payment, go ahead and do it,” Grewal told Ladders recently. “Mitigate that interest accrual being capitalized and adding to the principal. That’s just a small tip and not everyone is in a position to do that.”
Other mistakes borrowers often make is sticking to whatever payment plan was provided to them by default. Grewal said often borrowers think the default plan is the one they should be on, and while for some it’s the sweet repayment spot, it’s often not for others with debt burden and career trajectories that aren’t going to see earning more until down the line.
Are businesses doing enough to help borrowers?
The short answer is no.
While Grewal said his clients at IonTution are “forward learning,” he said across the US, businesses aren’t doing enough to help the debt holders get a better grasp on their financial lives.
“There’s certainly a need to move faster and more decisively,” he said. “There are some good brands and employers out there that are putting together innovative programs. When they do that, I think it builds confidence among other players, specifically down market, those small and midsize businesses which tend to follow what the bigger businesses are doing. I think we’re moving in the right direction, but I think there’s a lot of work that has to be done.”
Eight percent of companies currently offer some kind of student loan repayment as a benefit in 2019, according to the Employment Benefits report by the Society for Human Resource Management. While that number doubled from the previous year (4%), it’s something on the minds of all employees with more than 50% considering student loan debt repayment an important workplace benefit, with 46% saying they’d forgo a 401(k) match to receive student loan assistance.
Grewal said he’s noticed the same pattern with his clients.
“Without a doubt. We certainly see it in our analysis. There are absolutely improvements in the effluence of recruiting if you have a repayment assistance program in place. We’re doing a lot of active measurement in terms of tenure and retention. These employees are absolutely going to stick around for along period of time, not just because of the finances, obviously, it’s clear.
“It sends a missing message that we understand that we required you to take on investment to work here and we value that investment. That creates a softer but a real rapport in the relationship between the employer and employee. They genuinely feel that the employer cares. That’s the truth — it takes a lot to go out there and do something that’s emerging, that’s not traditional, to put that program in place where you might not have the expertise in house and lean on a third party. The employers are really stepping up and I think the employees are recognizing that.”