Research reveals that most recent college graduates carrying student loans have grossly underestimated the burden they would face, with monthly payments that are so substantial that they impact nearly every aspect of Millennial life.
In the study fielded by Citizens Bank, Millennials with student loans say they are now are spending nearly one-fifth (18%) of their current salaries on student loan payments.
60% of Millennials now say they expect to be making payments well into their 40s.
Surprisingly, less than half of Millennials making student loan payments have explored lowering monthly payments through refinancing.
The study found graduates with student loans grappling with the trade-offs required to make their student loan payments every month:
- 54% have limited their travel
- 50% have limited their shopping for clothes, shoes and accessories
- 46% have limited their spending on entertainment and social events
- 45% have limited their spending on eating out
- 40% have limited the amount they can spend on rent or mortgage payments
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“The long-term cost of college continues to be a major challenge for Millennials, even after they have established themselves in the workforce and significantly improved their credit from where they were when they started school,” said Brendan Coughlin, President of Consumer Lending for Citizens Bank.
“As this generation of college graduates starts to contemplate future life events like home purchases and retirement, it becomes increasingly important for them to take control of their college debt, whether it’s through refinancing or other tactics that can help them limit its impact on their overall financial health.”
In light of this, some Millennials now express buyer’s remorse regarding their college investment, with 57% saying they regret taking out as many student loans as they did. More than one-third (36%) of Millennial graduates with student loans said they would not have gone to college if they had known how much it was going to cost them.
According to The College Board, the cost of college has increased 13% for public four-year colleges, and 11% for private non-profit four year college in the last five years. To help pay for college, more than three quarters of respondents to the Citizens survey (77%) indicated they had received federal loans. One third of respondents said they had received private student loans, which typically are smaller and in most cases require a credit-qualified co-signer.
“Unfortunately, the long-term cost of college is leading some graduates to question the value of their investment — in many cases, before they have fully explored their opportunities to significantly reduce their payments,” Coughlin said. “Similar to our approach to working with student borrowers and their families at the front end of the college journey, we are committed to helping graduates understand their options and manage their debt in a way that complements their broader financial goals.”