Study Reveals The Sacrifices College Students Make For Higher Education
With the rising costs of college, students sometimes have to prioritize how they spend their money. Whether they have to wait to buy a new car or avoid purchasing a home until they are debt-free, people frequently have to make sacrifices.
But what kind of things are being put on hold? How does this compare against people without student loan debt? In a new study, CollegeFinance.com surveyed 808 college graduates with student debt and 214 who forwent student loans. The results reveal how pervasive student debt is, how people are paying off their loans, and what they give up in the process. Here are some of the findings.
photo/ Mary Pahlke
The Reality of Student Loans
With outstanding student loan debt on the rise, people are trying to figure out how to pay it off. According to the study, on average, respondents reported having $27,561 in student loan debt. Almost all (90%) of those reported sacrifices to make their payments.
Women (91.5%) were slightly more likely to make sacrifices than men (87.8%), but how much people had borrowed directly correlated to the severity of their sacrifice. Graduates most prioritizing paying their school loans had acquired $25,000 to $50,000 (95.6%) in debt to complete their degree. This percentage was surprising because it was slightly more than those who borrowed more than $50,000 for their schooling (93.5%).
Only 10.3% of borrowers did not sacrifice anything to pay their student loans.
Those without student loans were more likely to be satisfied with life, the study revealed. More than half (53.8%) of those with no student loan debt claimed to be extremely or very satisfied with their life overall compared to just 38.8% of those who’d borrowed money. Also, nonborrowers were twice as likely to be happy with their financial well-being.
More than half (53%) of respondents reported experiencing depression due to their student loan payments.
Payment Strategy
All lenders are different and can have specific requirements in place when borrowing money for school. Depending on who you’re borrowing from, some lenders require the loan to be paid off in 10 years, and others give people more time. How are people paying off their student loans?
More than 3 in 5 student loan holders only pay the minimum payment. Nearly 1 in 3 people only or mostly make payments beyond the minimum requirement. Only 1.5% of those surveyed failed to make their monthly minimum payments.
The study continued to dig into the lifestyles of those who had student loans compared to those who did not. While the top activity people with school loans did was pay their bills (82.9%), those who did not borrow money liked to dine out (92.5%).
Those without student loans were approximately 31 percentage points more likely to have money saved for emergencies and 21 percentage points more likely to pay for health insurance. Almost 1 in 4 people with student loans said they own a car but not the one they wanted. More than 1 in 5 parents with student loans said they are unable to save as much as they’d like for their children. Moreover, 17% of respondents said they could not afford to date.
Student Loan Budgeting
Creating a budget that best fits someone’s lifestyle is essential, especially when school loans are involved. So what were some of the best ways those surveyed decided to pay off their student loans?
Approximately half (52.7%) reduced personal spending or got a side hustle (49.8%). More than 1 in 5 used cash-back programs or asked their family for help. Finally, 17.7% refinanced their loan using an income-based plan. More than half of millennials took on side hustles to pay off their student loans.
The top three side gigs people took up to help pay for school loans were freelancing, selling items they no longer used, and selling homemade items online. Those with student loans spent 51 hours, on average, monthly on second jobs compared to only 36 hours for nonborrowers.
Life After Loans
Once people pay their loans off, what do they do with the money they would have used for a payment? Approximately 42% of respondents saved for emergencies or saved for retirement. Nearly 1 in 3 invested the money, traveled, or paid off other debts. When deciding whether to take on more debt, 40.4% said they would do so to buy a home, while more than 1 in 4 people said they’d borrow again to purchase a vehicle.
There is usually a light at the end of the student loan tunnel, but it takes planning, saving, and budgeting to cross the finish line. No matter how someone gets there, they should be proud of themselves for paying off the debt they owe.
Author: Rajhu Goraai
