How Student Loan Debt Disrupts Grads’ Finances

Student loan debt looms over 43 million Americans, obstructing their ability to save effectively and reach financial goals. 

A new survey from MarketWatch Guides found that 97% of recent grads with student loans say they’ve delayed or abandoned hope of reaching milestones such as buying a home or having children. On average, these young adults – who graduated between 2015 and 2024 – say their student loan debt has set them back 10 years.

To improve their situation, many of these grads are counting on debt forgiveness. About 49% of recent grads with loans said they expect the government to fully eliminate their student debt, and 18% say they aren’t paying anything in hopes their debt will be canceled. 

To learn more about the financial impact of student loan debt, MarketWatch Guides surveyed 840 Americans with student debt who recently graduated (within the past decade). Read on for tips on managing your own student debt.

Grads Say Student Loans Set Them Back 10 Years

With the average borrower owing nearly $40,000, about 66% of recent grads with loans say the U.S. has a student debt crisis. Student debt disproportionately impacts recent graduates, who rarely make enough income to pay down their balance while managing the cost of living and saving toward important milestones.

“Recent work suggests that student loan debt reduces the likelihood of owning a home, lowers wealth, and increases the risk of exhibiting signs of financial distress, such as making late payments,” said Maggie apRoberts-Warren, assistant professor of economics at Eastern Washington University. 

Many young adults blame student debt for their lack of financial progress. About 71% of recent grads with loans say their debt has set them back financially by at least a year. Among that group, the average grad says they’ve been set back 10.2 years, according to our survey.

About 39% of grads surveyed said their financial circumstances made loans necessary, but 31% took out loans because they wanted to attend a school with more expensive tuition, such as a private or out-of-state institution. 

Many came to regret their loans. Although degrees are generally linked to higher earnings — and 61% of grads surveyed say their income would be lower had they not earned their degree — most recent grads (54%) still say taking on student debt has not been worth it. 

60% of Recent Grads Say Their Loans Have Disrupted Plans to Start a Family

To prioritize paying back student loans, grads often delay or give up on traditional financial and life goals, our survey found – and experts agreed.

“Even people who expect to earn high salaries over their lives can have little cash on hand right after college,” said Constantine Yannelis, an associate professor of finance at the University of Chicago. “They may not be able to buy a car, a house, or move to take a higher-paying job.” 

Overall, 97% of recent grads with loans say they’ve delayed or abandoned at least one milestone due to their student debt, according to our survey. About 60% of recent grads with loans say their debt disrupted their plans to start a family, including 23% who say they’ve abandoned their plans to raise children due to their student loans. 

Homeownership seems equally unattainable, as carrying a large debt balance often makes it harder to be approved for a mortgage. About 46% of recent grads with loans have delayed plans to buy a home because of their student debt, and another 26% have entirely given up on doing so.

Most grads with student debt (54%) say they’ve been denied some type of loan. About 29% of that group says they’ve been denied a mortgage, and many have been denied credit cards (49%), personal loans (45%) and auto loans (34%). 

With difficulty obtaining loans and a lack of expendable income, many grads undergo “failure to launch” — remaining reliant on family rather than becoming independent and working toward goals like homeownership. About 48% of recent grads with student debt say they rely on family for financial support, including 44% who say they still live with their parents. 

91% of Recent Grads With Loans Have Cut Back on Spending

Even after shifting their priorities to pay down debt, most recent grads (53%) say it will take them at least 10 years to clear their student loan debt, and nearly one-third (29%) say it will take at least 20 years, according to our survey.

In addition to downgrading their goals of homeownership and raising a family, 91% of grads say they’ve lowered their spending because of their loans. The most common categories people trim are dining out (41%), travel (39%) and savings/investments (38%).

With limited budgets, it’s important that young professionals research the cost of living before moving to a new area for work, so they can better afford essentials while paying down debts. 

“Many recent college graduates accept a job offer or admission to graduate school without fully exploring costs associated with moving to and living in (a) city or region,” said Sara Ray, associate director of financial wellness and education at Indiana University.

Complicating their repayment strategy is the fact that 83% of grads are tackling other forms of debt in addition to student loans. About 41% carry credit card debt, 27% have mortgage debt and 26% have auto loan debt. 

Many Grads Pay Less Because They Expect Debt Forgiveness

Borrowers are keeping an eye on the Biden administration’s debt relief efforts. As of late May, the administration has forgiven $167 billion in student debt, and it reports that more than 1 in 10 federal student loan borrowers has been approved for some relief.

Optimistic that their debt will be slashed, we found about 69% of recent grads with loans say they’re paying less due to the possibility of debt forgiveness, including 18% who aren’t paying anything toward their debt.

About 49% of recent grads with loans say they expect the government to completely eliminate their loan debt. 

About 60% of grads with debt say the government should cancel all student loan debt, but that support varies by background. And 71% of those who attended a four-year public university support debt cancellation, compared to 53% of those who attended a four-year private program.

Grads who say they struggle to make loan payments are more likely to support forgiveness than those who don’t by a margin of 65% to 52%. Grads who support forgiveness efforts are also more likely to say they plan to vote in the 2024 election — 76% to 64%. 

Tips for Managing Finances With Student Loan Debt

Prioritize Paying Off High-Interest Debts 

If you have several debts, you should always pay at least the minimums on each, but be strategic about which you pay off most aggressively. Your student loan debt may have the largest balance, but credit card debt often carries higher interest rates, meaning it’s costing you more than your student loan debt. 

Many embrace the “debt avalanche” strategy, according to the Consumer Financial Protection Bureau. This strategy helps borrowers get the most out of their money by paying off debts with the highest interest rate first, before moving on to the debt with the next-highest rate.

Optimize Your Repayment Plan 

No single student loan repayment plan will work best for everyone. If you’re struggling to make payments, consider an income-based repayment plan, rather than a traditional fixed plan. One popular resource is the U.S. Department of Education’s loan simulator tool, which lets borrowers describe their financial circumstances and suggests a plan that works for their income and timeline, including whether to consider debt consolidation. 

“Having student loans doesn’t have to be a ‘forever burden,’” said Chris Harris, associate professor of finance at Elon University. “Everyone can create a plan to eliminate them more quickly. It may mean making some sacrifices in the short term, but the relief of being able to move forward with life will feel worth it.”

Increase Your Income To Resolve Debts Faster

Generating additional income allows you to tackle your debts more aggressively, helping you avoid paying extra money toward interest. Many Americans today find themselves taking on side hustles in addition to their primary source of income. 

If other commitments prevent you from taking on a side gig, consider asking for a promotion or job-hopping to increase your salary. 

Our Experts

• Constantine Yannelis, Ph.D, Associate Professor of Finance at the University of Chicago Booth School of Business 

Constantine Yannelis joined Chicago Booth in 2018. He is also a faculty research fellow at the National Bureau of Economic Research. His research focuses on household finance, corporate finance, public finance, human capital and student loans. His recent research primarily explores repayment, information asymmetries and strategic behavior in the student loan market.

• Maggie apRoberts-Warren, Ph.D, Assistant Professor at Eastern Washington University 

Maggie apRoberts-Warren’s research interests include monetary policy, loan default and student loan debt. She received her Ph.D. in international economics from the University of California, Santa Cruz in 2017. She previously earned an M.A. in international economics and a B.A. in economics from the same university.

• Chris Harris, Ph.D, Associate Professor of Finance at Elon University

Chris Harris has a passion for finance, specifically in understanding how individuals and companies manage the finite resources they have available to them. He enjoys teaching classes that help students understand how companies make financial decisions, and how individuals can make wise financial decisions to achieve major financial goals.  

• Sara Ray, Associate Director of Financial Wellness & Education at Indiana University 

Sara Ray has over a decade of experience delivering personal finance education and leading financial wellness programming. She serves as the associate director of financial wellness and education at Indiana University, providing leadership for the peer-to-peer “Student Financial Educator” program and multi-campus initiatives. She earned an M.S. in human development and family studies from Iowa State University and a B.A. in economics from the University of Texas-Pan American.

Methodology

The MarketWatch Guides team surveyed 840 Americans who graduated college between 2015 and 2024 and currently owe money toward student loan debt. The survey was run using Pollfish, a third-party market research and survey platform. We collected survey data for this report from May 1-7, 2024.

We weighted responses to align with population demographics across age and gender to be representative of all U.S. adults (aged 18+). The margin of error is +/- 4% with 95% confidence.

Questions about our research? Please contact the team here.