Imagine looking at your monthly finances and seeing around 50% of your income go to debt repayment alone. As a student myself, I have heard stories like this from students with tens of thousands of debts from student loans. The sad part about this situation is that the banks did not give these loans by accident. Student loans are heavily advertised to many students like any consumer product, but loans can have far-reaching consequences that many people don’t understand; However, the unfortunate reality is that these far-reaching consequences are being seen by an entire generation of college graduates.
The first big consequence of heavy student loans is the drain of debt repayments on a person’s finances. Depending on the amount of debt a former student has the impact of these repayments can take up from ten percent to more than fifty percent of a person’s monthly expenses. Having most of your monthly expenses taken up by debt repayments places a weight on your lifestyle that can sit there for years. Spending on non-critical activities could be stopped almost completely and if spending doesn’t stop then the amount of debt and repayments will start going up. This lifestyle change could also impact people’s lives significantly by delaying major life purchases indefinitely.
The major decisions a young couple can make such as buying a house and having kids might have to be sidelined depending on the severity of debt repayments. This delaying of large purchases could mean that individuals take years longer to reach financial milestones compared to other generations. This delay in purchasing could also impact the markets themselves since houses will have to sit for years before they can be bought by the next generation. The current wave of economic damage could leave this generation of college students permanently “behind” by traditional indicators of financial success. Personally, I’m terrified that there is more financial side effects of this generational lag that we will discover in the future.