When realizing the current debt situation in the United States, it can be difficult to maintain an optimistic outlook on the future. The national debt, is now over $18 trillion, and many U.S. citizens are finding themselves living with debt as they try to cope with the current economy.
For many students, the notion of going through a higher education school debt-free is often an absurd impossibility, especially when you consider the current outstanding student loans amounting to over $1.2 trillion nationally.
With this staggering amount of student debt, it’s understandable that many individuals have connected this with other shifts in the demographic. Economists blame student debt for decreased marriage rates, home-buying, and childbearing, to name a few.
It makes sense: with higher amounts of debt, one can see how qualifying for a mortgage might be more difficult or how starting a family might seem foolish.
How Do Loans Impact Students?
A recent study, however, has shown that student debt actually has very little impact on these other factors. The study compared graduates with outstanding student loans to a control group of those who did not. While graduates with student loans did have more difficulty qualifying for mortgage and auto loans right after college, this difficulty seemed to disappear after two years.
This is likely due to the fact that college graduates simply haven’t had the opportunity to earn an income that would qualify them for these types of loans. Once they start working, this disadvantage (obviously) disappears.
Can Student Loans Lead to Good Habits?
In addition to this, student loans may actually be a benefit for graduates. The data show that students with debt tend to have lower loan delinquency rates than those without. This could be because the process of repaying a loan allows students to develop good habits for managing debt while helping them build better credit.
Another study confirms these findings by showing that it takes a significant amount of debt to affect a person’s ability to own a home. According to this data, the repayment amount needs to be 5% or more of the individual’s income (or $50,000 in total debt) in order to have a significant effect.
Mounting Debt and This Economy
Although the total amount of outstanding student loan debt has increased over the last decade, this increase hasn’t had an effect on graduates’ ability to qualify for important loans — students are just as likely to catch up with their peers now as they were ten years ago.
These loans can also be a valuable investment, allowing people to earn an advanced degree that qualifies them for a higher-paying job.
Does this mean that students should take on student loans enthusiastically? Certainly not. However, for those students or graduates that already have huge amounts of debt, rest assured that it will not ruin your life.
Of course, student loans make budgeting harder when you are on a limited income, but with a planned out budget, and an aggressive debt repayment plan, graduates can reach their financial goals alongside paying off their student loans.
For those with student loans, do you feel that the loans are preventing you from major financial decisions?