Millennial student debt is one of the most likely things to hold you back in life. Here is how debt is holding you back, Millennials.
One of the things most likely to hold you back in life is your student loan debt. While it’s possible to borrow smart, and use debt as a way to leverage different opportunities, it can also drag your finances down. Using debt requires that you walk a fine line that can result in financial bondage if you aren’t careful.
Even if you do use debt for something considered “reasonable” like education (student loans), buying a home, or starting a business, it’s important to borrow as little as you can and to pay it back as quickly as possible. If you don’t, even so-called “good” debt can begin to hold you back.
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How Debt is Holding You Back
1. Debt Saps Wealth
Even though it’s possible to use debt as a way to jump-start financial success, you should realize that, ultimately, debt saps wealth. This is especially true of consumer debt with high interest rates, such as credit card debt. When you are paying interest to someone else, you reduce your disposable income in a way that leaves less for you to use the way you want.
Paying interest means that your money is going to someone else — and not going to build a profitable side business, improve your financial future through wise investments, or even to a great family vacation. Pay off your debt as quickly as you can in order to ensure that your money is being used for your financial future.
2. Debt Can Affect Your Ability to Find Work
Another way that debt can hold you back is in your professional life. While not all jobs require a credit check, some employers might want to know your credit history. If you are going to work in the financial sector, or if you have a sensitive job, you might be considered vulnerable and unsuited if you have a high amount of debt.
Getting out of debt can help you improve job prospects in some cases. Not only that, but most people feel a jolt of confidence when they pay off debt. Being debt free can translate into confidence and a good attitude that can help you get hired, as well as help you negotiate a higher salary. You might not even realize how debt has been weighing on your confidence and attitude until you pay it off and feel better about yourself and your situation.
3. Debt Can Impact Your Relationships
Stress introduced into relationships because of debt can really make a difference. What happens when you are in debt can cause stress and anxiety, and lead to difficulties with your loved ones. Indeed, marriages have been ruined because of the stresses that come with being in debt. Plus, your anxiety can impact relationships with children, parents, friends, and coworkers. Get out of debt, and you will find yourself more relaxed, and better able to focus on building good relationships with those around you.
The Student Loan Crisis
The student loan crisis is going to cause changes in the economy because it has started to cause a trend in which recent graduates are delaying their first home purchase. With student loan debt in the United States having more than doubled, it is driving down homeownership due to the lengthy-time period it takes to pay back student loans .
This money if saved up each month could be used for a down payment. Unfortunately, the cost of living and education today has increased but minimum wage has not increased with the same rate of inflation as other sectors. The previous generation could be home-owners and have no student debt within a few years after graduation.
Today, many are still paying their students debts 10 years post-graduation and still do not own homes . Today to get a decent income many require more than a Bachelor’s degree but the baby boomers only needed a Bachelor’s, therefore this generation is in more student debt and spend more years in school, delaying their career start date.
Student loans are keeping many in the 24 to 32 age group from buying a home, according to a Federal Reserve study and from 2005 to 2014, the percentage in that group owning homes dropped from 45 percent to 36 percent, 20 percent of which likely came from education debt burden . During this 9 year period, college debt doubled per capita, leading to 400,000 recent graduates not buying homes who otherwise would have .
This also means that credit scores are being impacted, even if they have a payment a couple of day late. Therefore students are struggling more often to get credit card limit increases and car loans . It is unfortunate that “83% of non-homeowners say student loan debt is preventing them from buying a home, according to the National Association of Realtors (NAR)” , that is a ridiculously high number as they are the next generation and if they are coming into this economy with this much struggle the housing sector is not the only one that will be impacted.
Another issue is that “options are slim and competition is fierce, as the availability of cheaper homes is about half that of pricier options — and supply is tightening” . With less homes in an affordable price range, it is forcing those that cannot afford to increase their home budget to keep renting and sometimes they have to rent far away from work to get cheaper rent.
The student loan crisis has become such a large problem, some are going as far to say it has “completely broken…the business cycle,” with school loans increasing steadily throughout the last financial crisis even with debt growth slowing in other sectors, nearly “one-fifth of the U.S. population is holding student loans..double the 2004 level” .
With first-time homebuyers being a key part of America’s housing sector, with the current patterns, the real-estate industry and economy is going to be taking a big hit due to the student loan crisis . The government needs to better assist students to accommodate the difference in inflation between cost of living and minimum wage. A program with lower interest rates for recent graduates and possible longer amortization periods, to be able to make lower monthly payments would greatly benefit the young generation trying to start their careers.
Millennials and Debt — A Shift in Mindset
Being in debt can really weigh on a person. From holding you back financially to holding you back in other areas of your life, debt can be a real burden.
Take steps to pay your student loans faster and other debts, and you will feel happier and have more income at your disposal.