If you feel like more and more people seem to be dealing with student debt in America, you’re not imagining it. As ValuePenguin reports, the average amount of student debt in the U.S. was $32,731 as of 2019 — an increase of about 20 percent from just a few years ago in 2015.
As a whole, student loan debt has risen more than 300 percent since 2004, thanks in part to rising expenses like tuition and cost of living. Student debt affects its borrowers perhaps most straightforwardly by demanding an automatic percentage of every paycheck, which in turn affects every other aspect of their budgeting.
Here are four more ways student loans can change the lives of those who hold them.
Delaying Financial & Life Milestones
As Andrew Housser — debt industry expert and co-founder of Freedom Debt Relief — notes for the Interior Journal, research has shown that getting caught in a debt cycle spurred on by student loans can cause people to “put off saving, buying a house and making other investments” because so much of their income goes toward student loans.
Many of the milestones our society values — getting married, having children, buying a home, traveling the world, buying a new vehicle, starting a business, renovating a home or pursuing higher degrees — require some degree of financial investment. And people with significant student loans may have to postpone or forego these events in order to stay current on their loans.
Falling Behind on Other Debts
In a similar vein, those with student loan debt may find themselves facing the difficult choice of which debts to service. With limited income, it’s possible to face the excruciating choice of paying off some combination of credit cards, medical bills, your auto loan, housing costs, or student loans.
Making late payments on any lines of credit or loans can have an adverse effect on your credit score. This, in turn, makes it more difficult to get approved for future credit and hikes up the amount of interest you’ll likely have to pay on any sum you borrow.
Using Credit in Lieu of Emergency Savings
One of the sneakier ways student loans can affect borrowers is commanding a large percentage of their earnings — sometimes to the point they’re left with little to nothing in the way of deposits to an emergency savings account. While people may be able to skate by like this for some time, all it takes is a single financial catastrophe to expose the pitfalls in this scenario.
Many financial experts recommend making emergency savings a priority, even if it means paying down student loans less aggressively while you build your safety net concurrently. The first target to aim for is usually three months’ worth of living expenses, but many people will recommend you save six to 12 months to keep ahead of an emergency if possible.
Dealing with Extra Debt-Related Stress
One survey found 85 percent of student loan borrowers consider their educational loans to be a significant source of stress. And, one in three participants believe debt is the leading stressor in their lives.
We’ve covered many of the tangible effects of student debt, like lack of emergency savings and having to delay life milestones. It’s important to also consider the mental effects the burden of debt can have on borrowers — which can even fuel physical effects like lack of quality sleep.
Talking about the far-reaching effects of student debt is a first step toward helping borrowers figure out how to effectively manage their money and hopefully minimize the negative impact it has on their lives. There’s no easy answer, but it may help to know you’re far from alone in dealing with this ongoing challenge.