5 Disheartening Realities About Student Debt

Would you still take a student loan after seeing the murky statistics? This is what life may look like.

Student debt is the only type of domestic debt that consistently augments. Just behind mortgages, it is the second most prevalent type of debt owed by American households. A fresh Pew Research report calls attention to a disconcerting upward trend in respect to student debts:

-          1989: 16%

-          2001: 22 %

-          2010: 37 %

The upward inclination of the figures is worrisome for the scores of aspiring students who often have little choice but to turn to student loan.

This one is a no-brainer. People who borrowed for college are less content with their financial situation compared to those who haven’t. The former are also more unlikely to believe their education has paid off.

 

College educated households have twice the median outcome of households where no one holds a bachelors degree. It’s true and within the periphery of logic that taking student loan leads to a lower net worth. That said, taking the help of a student loan to finance a college education doesn’t appear to alter income prospects in any way. Indeed, college-educated households have more or less the same median income irrespective of outstanding debt.

 

Chances are that young households with outstanding student debt will also have car loans and credit card debt. The sum of all their overall outstanding debt is roughly twice the overall debt of young households with no student debt.

 

The debt-to-income ratios continue to increase for young students taking loans. It’s increasingly difficult to make ends meet for young household that have student loans to pay off.  The average young college-educated household with student debt has debts equal to two years of income. The figures are much better for both young households with no student debt and young households which are less-educated.

Both carry half the debt load which equals to one year’s income.

College-educated households that have to repay student loans have a considerably lower net worth than households who don’t have student debt.

Young college-educated households with no student debt have the highest net worth, by far. Young households who don’t have to repay students loans enjoy about seven times the net worth of households with student debt.  

Non-college educated households with outstanding student debt get the worst end of the deal. They have the worst prospects for wealth accumulation. They are far behind their fellow student debtors who graduated from college.

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