While achieving a college education is part of the American Dream, the cost of earning a college degree is causing many young adults to delay other major life events, according to a new Bankrate Money Pulse survey.
Forty-five percent of Americans with student loans, and 56% of those between 18 and 29, have put off a major life event because of the burden of that debt, Bankrate reported. More than half of student borrowers who were surveyed, and two-thirds of millennials in that group, said they didn’t receive enough information or advice about the financial risks.
In the July issue of Credit Union Magazine, Mike Schenk, CUNA vice president of economics and statistics, noted that credit unions have a long history of focusing on consumer education and financial consulting.
“We provide provide personalized advice and guidance that make helps people reach their goals and make better personal financial decisions,” Schenk wrote. “And that’s what young people need.”
Challenges for college graduates–debt, a tough job market, slow wage growth–are well documented, Schenk said, but the difficulties for those without college degrees are greater still.
“Today median weekly earnings for college-educated workers are roughly double the norm amough those with lower levels of education,” Schenk wrote. “The college wage premium remains near all-time highs.”
Thomas Scanlon, a financial adviser with Raymond James Financial in Manchester, Conn., offered Bankrate a basic approach for younger adults trying to manage student debt.
“Live at home for as long as you and your parents can stand it,” Scanlon said. “I get it; nobody wants to go back and live in their parents’ basement. The reality is, with student debt, a car loan, cellphone bill, car insurance and some spending money, most of the paycheck is gone. Live at home and save the rent,” he said.
For credit unions, millennials represent an important, financial active segment of their membership, Schenk noted. CUNA’s market research department estimated credit unions served 20.99 million millennials at year-end 2014, up from 19 million at year-end 2013.
“While young people face great challenges in today’s economy, credit unions are helping many rise to those challenges,” Schenk wrote.
Here are some other tips for millennials with large amounts of student debt:
Make sure to finish
While 49% of college graduates carried student debt, the burden isn’t confined to those who have diplomas. More than a third of those who finished “some college” education carried student debt, according to the survey. 63% of them reported not getting enough information. A quarter delayed buying a home, and nearly a quarter delayed buying a car or saving for retirement.
“Complete the degree, because if you have taken out a student loan and you do not complete the degree, it may be even harder to get the position to generate the income to pay it off,” says Angela Giboney, CFP professional at AFG Financial in Mill Creek, Washington.
Dealing with debt now
For those with student debt — such as those ages 30-49, the group most likely to have debt, according to the survey — experts offer a few tips on dealing with what can seem like an insurmountable sum.
If you have a high credit score, consider consolidating multiple loans into 1 with a private lender to get an even lower rate than you are paying now, says Rose Swanger, a financial planner at Advise Finance in Knoxville, Tennessee. She recommends those with a federal loan use the income-based repayment method, while those with public sector jobs, such as a teacher or firefighter, should take advantage of loan forgiveness after 10 years of employment.
Advice for those taking out loans
Before signing on the dotted line to finance your education, consider these tips from experts to make college costs more affordable:
- Explore scholarships available for academics, activities, sports and need to reduce the amount to borrow.
- Fill out the Free Application for Federal Student Aid even if you don’t think your income will qualify. Many loans require a completed FAFSA to apply.
- Compare private lenders, which can offer competitive interest rates.
- Boost your credit score to get the best possible terms on student loans.
- Make sure your likely career after school will enable you to pay off the entire balance within 5 years. However, a high-paying job doesn’t mean no student debt. Bankrate’s survey found that those making $75,000 or more a year — the highest income category — were most likely to carry college loans, with 44% having student debt.
Find a ‘cheaper’ education
Another way to cut down on education costs is to consider alternatives to pricey private schools. Katz suggests holding off on “name-brand” schools during the undergraduate years and spending that money on well-known graduate programs.
Or, consider community college, trade school, a certificate program or the military, Scanlon says. “Not every student is college material,” he says.
Persaud of Transition Planning & Guidance says that the best college for you or your child is the one that is affordable and doesn’t leave a pile of debt after graduation. “No school offers a money-back guarantee if you can’t find a job after college,” she says.