By Treasurer David McRae
Americans today have over $ 1.7 trillion in student loan debt, which has a huge impact on how we live, work, and shape our future. Here in Mississippi, students typically graduate with about $ 30,000 in debt. In a state where the average individual income is only $ 24,500, this is a huge financial burden.
However, the implications of this student loan debt go far beyond mere dollars and cents, but often affect workers’ wages, future savings and retirement, and lifestyle.
According to a recent poll by TD Bank, a fifth of the salary received is used to pay off student loan arrears, often exceeding car and even rental payments. This is where seepage begins.
Since such a large portion of the salary is used to pay off student debt, many borrowers are left with less spending and, more importantly, saving. In fact, the vast majority of borrowers (61 percent) save less than one-tenth of their income each month; many do not save anything at all.
This disadvantage of economy manifests itself in different ways. Nearly half (41 percent) of TD Bank survey respondents reported late 401 (k) contributions, and roughly the same proportion said they did not have a fundraiser for a rainy day, causing many to use credit cards to cover emergency expenses.
It’s easy to see how this translates from finance to lifestyle. A TD Bank poll found that 60 percent of student loan borrowers do not take leave. 36 percent failed to become homeowners. 35 percent rarely dined outside the home. 26 percent postponed the birth of children. 21 percent postponed the wedding. The list goes on, but I think the bottom line is already clear: milestones are being delayed – or skipped altogether – by student loan arrears.
So what do we do about it? Financial gurus advise borrowers to make a minimum monthly payment each month and, if necessary, consider refinancing their loans.
Of course, it is best for future graduates (and their families) to prepare. College Savings Mississippi, a division of your State Treasury, offers two Mississippi 529 plans that can help reduce – or eliminate – the need for student loans. Many families choose to lock in today’s tuition fees and fully prepay college with MPACT, while others choose to deposit into a tax-free savings account using MACS. Both have huge benefits, so if you are a parent or grandparent, you should take a look at our site to find out more.