The $1.2 trillion college debt load across the nation causes repercussions in the economy, forcing young people to put off buying their first homes as they work to pay off their loans, averaging about $30,000.
But according to a new survey, a majority of graduates with student loan debt say they’re better off than their parents were at their age.
While more than 60 percent of recent college grads report having student loan debt, 58 percent believe their finances are in better shape than their parents were at their age, according to a new MagnifyMoney.com national survey.
The survey asked 1,000 adults under age 35 who graduated with a new college degree in the last 4 years (2011 or later) about their finances and student loans.
However, there is a disparity between those with loans and those without. Among those with loans, only 54 percent say they are better off than their parents were at their age. But among those without loans, 66 percent believe they are better off now.
Forty million college graduates face an average of $30,000 in student loan debt, according to the Consumer Financial Protection Bureau.
Nearly a Quarter of Grads Face $50,000 in Debt
Even more troubling: the survey found that 23 percent of borrowers reported over $50,000 in student loan debt. About one third of those borrowers reported graduate or higher degrees, with 50 percent saying they have a Bachelor’s as their highest degree.
Even among recent graduates with the burden of $50,000 or more in debt, 61 percent believe they will be better off financially than their parents in the future.
Those with associate degrees are most confident, with 66 percent saying they will be better off than their parents — compared to 60 percent of those with graduate degrees and 63 percent with bachelors degrees. recipients.
“This is the first wave of millennials that graduated into a growing job market, and their measured optimism reflects growing opportunities for those on the right side of the education divide, whether or not they have debt,” says Nick Clements, CEO of MagnifyMoney.com.
Repayment ‘Under Control’
Despite huge debt burdens, most grads say they have repayment well under control.
- 60 percent of recent grads with loans believe they will be able to pay them off in 10 years or less, the standard repayment period for Federal loans.
- Among the 15 percent of grads who report more than $50,000 in debt, that percentage falls to just 33 percent. With this group, 38 percent believe they will take more than 20 years, or never pay off their student loan debt.
- Among all student loan borrowers, 5 percent said they will ‘never’ be able to pay off all the debt.
Low Awareness of Federal help
Among grads with student loan debt, just 40 percent are aware of the Federal government’s “Pay As You Earn” or Income Based Repayment programs.
These programs allow borrowers to cap payments at 10-15 percent of discretionary income, and forgives loans which are not paid off after 20-25 years. All student borrowers of Federal loans are eligible to participate in at least one of these programs — if it will bring their payments below the standard 10 year repayment plan’s payments.
“While there is a growing number of private lenders ready to refinance student loans and offer lower rates, every Federal borrower should first look at these income based repayment options. They are incredibly generous, and offer a means to avoid a lifetime of debt for many borrowers,” says Clements.