The considerable amount of student debt is becoming a burden to indebted college graduates, a new survey revealed.
A survey by Merrill Lynch and Age Wave of over 2,700 U.S. adults from ages 18 to 34 revealed that on average, young adults graduate with $36,888 in student debt. Around 36% of them believe their debt was not equivalent to the degree they earned.
Almost half (43%) of young American families have student loan debt, a Federal Reserve data showed. This figure means that roughly 44 million Americans has a total U.S. student loan debt of $1.5 trillion. These young adults with student loan debt set aside an average of 9% or around $317 per month of their pre-tax salary for ten years, according to the Merill Lynch study.
Being indebted with costly student loans is also a significant reason Americans delay having children.
The Merrill Lynch report said the effect even reaches retirement years as indebted graduates are paying only around half the amount to their 401(k)s compared to those without a student loan debt.
Another report by Urban Institute, a Washington D.C.-based think tank, said that 40% of student loan borrowers could fail to repay their debt by 2023. The study also found that around 250,000 default on federal student loans every quarter.
Borrowers with the smallest amounts of student debt are the ones most likely to fail to repay — 32% of borrowers carrying a balance of $5,000 or less default at least once within four years. The main reason is they drop out before graduating.
For the student to earn enough to get even with their student loans, they need to pursue higher education to get ahead in life.
Americans are now living in an economy where they need higher education to improve their lives. The U.S. needs to revert to a model where people can get a high-quality degree without incurring costly debt, Maggie Thompson, executive director of the advocacy group Generation Progress said.