Student loan debt is, for many individuals and families, a significant financial burden.
The outstanding loan debt in the U.S. is $1.52 trillion, according to the LendEDU annual Student Loan Debt by School by State Report. Student loan debt is now the second-largest type of consumer debt, only behind mortgages.
Individual borrowers from the Class of 2017 graduated with an average of $28,288 in student loan debt, which was an increase over the year prior. States with the highest average amounts of debt included Pennsylvania, Rhode Island, Delaware, and New Hampshire.
Here we examine the effect student loan debt has on borrowers.
Student Loan Debt Limits Borrowers from Focusing on Other Financial Goals
There’s often a lot of conversation surrounding Millennials and their delays in making big purchases such as a home. They also tend to delay life milestones such as marriage.
According to LendEDU research, some of the primary sacrifices people made during the time they were repaying student loan debt included buying a home or even renting an apartment, traveling or taking vacations, social expenses, and saving for retirement.
The length of time it took to repay student loan debt played a role in the specific sacrifices that borrowers were more likely to make. The number one most-sacrificed expense, however, was traveling or taking vacations. Next, borrowers tended to cut back on social expenses and buying a home or renting an apartment.
Once Student Loan Debt Is Repaid, Possibilities Are Endless
The time it takes people to pay back their student loan debt ranges significantly. The findings from one survey showed that 42 percent of respondents paid back their student loan debt in one to five years. Among others, 26 percent of respondents said it took six to nine years to repay, and 21 percent said it took 10 years.
Once borrowers repay that tremendous debt, it opens new financial and lifestyle doors for people. For example,14 percent of people responding to the above survey said they were able to contribute more to their retirement once they paid off their student loan debt, and 12 percent said they started saving to buy property. Another 11 percent said they started tackling other debt once they took care of their student loan debt.
How Can You Pay Off Student Loan Debt Faster?
The faster someone can pay off their student loan debt, the more quickly they can move forward in their life and start to make more financial headway.
For people who have started repaying their student loan debt, the median monthly loan payment amount they make is $300. While making any payment is valuable, trying to make a larger payment, even only by a small amount can help you pay off the debt more quickly.
Making lump-sum payments whenever possible also helps repay loan debts faster. For example, if you were to receive a tax refund, an inheritance or a settlement, a lump sum payment toward student loan debt is often a smart financial decision. However, of surveyed individuals with student loan debt, only 39 percent said they ever made a one-time payment of at least $5,000. Those people that did saw shorter repayment timelines overall.
Other options that might be helpful to repay loan debt more quickly based on LendEDU survey results include not taking on credit card debt, living at home to avoid paying rent,and making more than the minimum payment.
Paying off student loan debt is no easy feat, but it’s possible. It’s important to be strategic and to pay as much as possible whenever you can. The sooner you repay your student loan debt, the sooner you can take the next step in your life.