Introduction
From being a means to pursue academic excellence, student loan debt has become one of the biggest challenges that the millennial generation faces in terms of their personal financial planning and future goals. As tuition fees continue to increase, young adults are befriending student loans, which affects their capacity to save, invest, and accumulate wealth. This three-part blog will look into how student loan payment hinders the attainment of financial goals amongst millennials and the possible ways of addressing the problem.
Impact on Saving and Investing
One of the most immediate effects of student debt is its impact on their ability to save and invest for the future.
Limited Disposable Income:
Recent graduates pay a substantial amount of money towards student loans and it cuts down their savings or investment capabilities. About 60% of millennials, according to a recent Bankrate survey, indicated that they had been delayed in saving for retirement due to student loan debts.
Missed Opportunity for Compound Growth:
Students defer saving and investing due to student debt so the longer they take the less they will be able to gain from compound growth. This can decrease their chances of accumulating assets and becoming financially secure in the long run.
Impact on Career Choices
The issue of student debt is highly significant for millennials and plays a crucial role in their career choices, as they tend to choose more well-paid positions regardless of their passion and beliefs.
• Debt Repayment Pressure:
Lender’s repayment pressure may force the millennials to be employed in careers that are financially rewarding as per their preferences regardless of the interest they have in them or not. This can lead to job dissatisfaction, and eventually lead to burnout of the employee in the long run.
• Limited Entrepreneurial Ventures:
Instead of starting their own businesses, or going for the non-conventional jobs that they may be passionate about, several millennials are being held back by high student debts. The financial risk involved in entrepreneurship may appear too overwhelming to handle especially when placed side by side the financial obligation in form of student loans.
Of all the effects of student debt on the millennials, the most concerning is the connection between debt burden and financial pressure leading to mental illnesses.
• Anxiety and Depression:
Research also reveals that tuition fees and debts are positively linked to anxiety and depression among learners. The thought process regarding loan repayment and the long-term effects that come with it bears a toll on the mental health of millennials.
• Stress-induced Decision Making:
Financial pressure causes aggressive monetary behavior, which results in the continuation of the undesirable tendencies among millennials. Such stress and reactive decision-making cycle might not allow those individuals to build and sustain long-term financial plans and goals.
Student loan debt is not going to disappear, and here are some ways how to cope with it:
Budgeting and Financial Planning:
It is imperative that millennials should be able to prepare a real and realistic budget plan for them to be able to manage their debts as well as save and invest their money.
Aggressive Debt Repayment:
One of the options is to increase the amount of money paid to the student loans every month by using a certain strategy, for instance, the debt snowball or the debt avalanche.
Exploring Loan Forgiveness Programs:
Research whether there are any professions that have federal and state loan forgiveness such as public service, teaching where one can have part or full amount of the student loan forgiven.
Increasing Income:
Better still, look for ways to earn more money, such as a raise, extra job, or continuing education, in a bid to pay off the debts quicker and meet the set goals.
Bottom Line
Thus, student debt poses multiple problems for the millennial generation aiming at creating a sustainable financial future. From saving and investing, homeownership, to career choices, student debt does not only place a restriction on saving and investing; it is also far-reaching. In this context, realizing these obstacles and, therefore, developing effective strategies for paying off debts and planning one’s financial future, millennials can start working on the barriers set by student loans and move towards the improvement of their financial situation in the future. That is why at Cancel Student Debt, we strive to find the best solutions that will help to solve the problem of student loans and assist millennials on their way to financial freedom.