Based on the numbers aggregated by the Education Data Initiative1, the student loan crisis is a crisis of epic proportions. Currently, 47.9 million borrowers in the US owe $1.75 trillion. This number is growing at an average annual rate of 27.9%.

Although most of the debt is federal loan debt, borrowers owe $132 billion in private student loan debt.

Other statistics to keep in mind include:

  • 21% of borrowers owe between $20,000 and $40,000
  • The average student loan debt is $37,693
  • Private student loan debt is growing faster than federal student loan debt
  • The median monthly student loan payment is $250
  • 20 years after starting college, 48.9% of student borrowers still owe $20,000 in student loans
  • Some professionals take over 45 years to repay student loans
  • 1 out of 5 borrowers see their student loan balance increase during the first five years of the loan

This type of debt often leads to student loan paralysis.

What is Student Loan Paralysis?

According to a report by UNC Greensboro and Rutgers University-Camden2, graduates with burdensome student loan debt often delay life’s milestones. This decision or inability to buy a home, get married, or save for retirement is called student loan paralysis.

The report found that while 11.3% of college graduates do not feel like student loan debt has affected their life decisions, nearly nine out of ten graduates do.

Three years after graduation, the study found that student loan borrowers:

  • Delayed marriage (18.3%)
  • Delayed going to graduate school (21.8%)
  • Can’t purchase a home (17.6%)
  • Delayed buying a home (28.9%)
  • Live with parents or a roommate to save money (34.1%)
  • Delay having children (20.4%)
  • Work at a job they don’t like to afford to pay the loan (14.8%)
  • Can’t travel for vacations (28.9%)

And, unfortunately, many college students don’t believe that taking the loans was actually a good idea. 37% are stressed due to their student loans and only 21.1% feel they have a better job because they went to college. 

If They Didn’t Have Loans

The report then asked these graduates what they would do if their student loans were forgiven. Most of the answers show that these former students would use the money to meet more traditional milestones.

  • 3 out of 4 would put money into savings
  • 1 out of 2 would save for a home
  • 2 out of 3 would pay off other debt
  • Just over half would save for retirement
  • 1 out of 5 would get married and/or have children

Although student loan forgiveness may not yet be a reality, helping students understand student loans and how carrying this debt will affect them in the future is crucial.

Offering a student financial wellness program can provide students with the information they need to make smart student loan decisions and keep them from experiencing student loan paralysis.

How Student Financial Wellness Programs Help

The truth is that most students need financial help in order to get a college education.

The 2021 College Hopes and Worries Survey Report3 found that 98% of those surveyed will need some form of aid to pay for college, with over half saying it would be extremely necessary. Therefore, it makes sense to help educate students on available financial aid and student loan information.

A student financial wellness program can help do just that by providing information, tools, tips, resources, and one-on-one counseling on:

  • FAFSA application
  • Grants
  • Scholarships
  • Work-study
  • Federal and private student loan information
  • Student loan repayment
  • Income-based repayment plans
  • Student loan forgiveness programs
  • Consolidation of loans

Just as importantly, a financial wellness program can help your students learn how to deal with financial situations and stressors in the future by giving them a strong financial foundation. They will learn how to budget, plan, save, and avoid unnecessary debt.

Through a holistic, hands-on process, they will be able to make financial decisions and understand the consequences of their decisions – including taking on appropriate levels of student loan debt.

By providing a well-rounded financial wellness program to your students, you will provide them with the information and skills necessary to hit major milestones without worry and the ability to make wise financial choices throughout their lives. 

Learn how iGrad's financial wellness program can reduce student loan debt

 

 

1 - https://educationdata.org

2 - https://sites.utexas.edu/contemporaryfamilies/2021/03/24/college-student-debt-brief-report/

3 - https://www.princetonreview.com/college-rankings/college-hopes-worries