Nearly One-Fifth of Millennials’ Salaries Spent on Student Loan Repayments
College graduates with student loans spend nearly one-fifth (18%) of their salaries on student loan payments, according to new research from Citizens Bank. 60% of these graduates, aged 35 and under, expect to be paying student loans into their 40s.
Even though they’re struggling with this debt, only half of the respondents have looked into refinancing options, consolidating private and federal loans or improving the terms of their loans.
The cost of college has increased 13% for public universities and 11% for private nonprofit colleges in the past five years, according to The College Board. To meet these rising costs, 77% of the survey respondents borrowed federal loans, and one-third received private loans, which are typically smaller and require a co-signer.
“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.”
The survey found students are cutting costs in other areas to pay for their loans, including:
- 54% limit travel
- 50% spend less on clothes, shoes and accessories
- 46% limit their spending on entertainment and social events
- 45% spend less at restaurants
- 40% lower their rent or mortgage payments
Due to this oppressive debt, many graduates are expressing buyer’s remorse over their education. 57% said they would have borrowed less, and 36% said they would not have gone to college if they had known how much it would cost.
“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.”
Many banks can help graduates with refinancing options. Citizens Bank offers education to students to help them better understand the borrowing process. They send annual “report cards” describing how much the student has borrowed and what their monthly payments will be when they graduate.
The Millennial Graduates in Debt study was conducted between February 10 and 22 of this year, and surveyed 501 Millennials in the United States who were college graduates and had student loans.