Only 56% of Americans under the age of 30 who went to college say the benefits outweigh the costs, according to a recent study from the Federal Reserve. The majority of the 43.4 million borrowers in the US — who hold a combined $1.75 trillion of student loan debt — made no payments toward their balance during the forbearance period, and half of borrowers in an April survey said they wouldn’t be able to make a single monthly payment if they had to.
Preeti Paliwal, a 31-year-old in New York City, currently holds $204,000 in debt after attending undergrad and grad school in New York for physical therapy. She said she opted to enroll in an income-driven repayment plan, which will direct 10% of her salary to her loans for 20 years, and estimates that she will have paid around $530,000 in that time period due to an 8% interest rate. It’s a monthly expense that has impacted her ability to buy a home, save for retirement and take care of her mother.
“I don't think people consider the fact that the people who end up taking on the highest loan burdens are people with the least amount of familial wealth,” Paliwal said. “And we are punished for being low-income by being forced to pay more for our education than families who aren't poor or low-income because of interest rates.”
Rough Start
While student loans affect people of all ages, younger millennials and Gen Z are being hit particularly hard, especially since they typically have lower earnings.
Rachel Grantham, a 25-year-old in Kansas, has about $56,000 in student debt — most of it federal — from undergrad and grad school. With her job teaching sports psychology at a military school, making less than $60,000 a year, she’s dreading having to make about $560 a month in loan payments.
With rent of about $1,000 a month, plus the increased cost of gas, she’s struggling to figure out where in her budget she can cut expenses. Filling up her car now costs about $80 instead of $40 previously, and she already shops at low-priced grocery chain Aldi.
Even the reductions she’s made, like saving $200 a month by not eating out, aren’t going to be enough to cover her monthly student loan bill.
“The cost of school is much more expensive, but the wages people are getting after they get a degree are not what they used to be,” she said. “I don't have any money left over at the end of the day to pay these student loans back because the expenses of everything else just keep going up.”
This article was provided by Bloomberg News.