Survey: Student loans have delayed wealth accumulation for Gen Z and Millennial borrowers

According to a new Bankrate survey, about 60% of American adults who have had student loan debt have put off making important financial decisions because of that debt.

For Gen Z and millennial borrowers alone, that number jumps to 70%. Student loans have prevented these borrowers from saving for retirement or emergencies, buying a home, or paying off other debts like credit cards.

Despite this, a majority of US adults with student loan debt said their degree has opened up career and salary opportunities that would otherwise not be possible, highlighting the complicated relationship many Americans have with their student loan debt.

Here are the most important findings:

Most adults said student loan debt was delaying other decisions

Of US adults surveyed who currently or previously held student loan debt, 59% said they have delayed financial milestones because of their student debt.

Emergency funds and retirement savings have been hit hardest, with 27% of respondents delaying saving for emergencies and 26% of respondents delaying saving for retirement.

Age also plays a big part in financial priorities.

Younger borrowers are more likely to delay important financial decisions than their older counterparts; 74% of Generation Z borrowers (ages 18-25) and 68% of Millennial borrowers (ages 26-41) have delayed financial decisions, compared to 54% of Generation X borrowers (ages 42-58) and 42% of millennial borrowers Baby boomers (ages 58 to 76).

Among younger generations, Gen Z respondents said they are the most likely to delay buying or leasing a car, while Millennials are the most likely to put off increasing their emergency fund and buying a home.

However, there are commonalities across the age groups. In every generation category — except for the silent generation (aged 77+) — about 25% of respondents report putting off saving for retirement, saving for emergencies, and paying off other debts.

However, Bankrate Chief Financial Analyst Greg McBride warns borrowers against deferring other debt payments, particularly credit card debt.

“Debt repayment should prioritize expensive credit card debt, especially when compared to government student loans, which have many favorable provisions unavailable for other debt, such as: E.g. deferral, income-related repayment or debt forgiveness in certain cases.”

Nearly 6 out of 10 graduates said college was beneficial

Although most borrowers said their debt prevented them from making important financial decisions, 59% of graduates said their higher education opened up career opportunities and increased their earning potential.

Only 17% said higher education hadn’t had much of an impact, and 19% said it had had no impact.

Even with the burden of student debt, McBride said the benefits of a college degree could be worth it.

“For many, this will lead to greater savings ability in the long run,” he said.

Bureau of Labor Statistics data backs this up: For full-time employees age 25 and older, the median weekly earnings for those with a bachelor’s degree is $524 higher than for those with only a high school degree.

Younger borrowers are most likely to feel regret about student loans

Gen Z and Millennial borrowers are more likely than Gen X and Baby Boomer borrowers to look back with regret on how they funded their college education.

Only 66% of Gen Xers and 52% of Baby Boomers say they would do anything differently about their student loan debt in hindsight.

In contrast, 85% of Gen Z and 77% of Millennials said they would change some part of their education, with most regretting not working or working too little during their school days.

Many Gen Z and Millennial students also said they would pursue a degree in a different field, attend a cheaper school, apply for more scholarships, or attend a community college rather than attend a four-year university.

Regardless of age, only 1% of respondents said they didn’t go to college afterwards.

How to manage your student loan debt

According to the Association of Public and Land-Grant Universities, the average student loan debt for borrowers who earn their bachelor’s degree from a public university is $25,921.

For those attending private universities, non-governmental schools, or graduate degree programs, this number can be much higher, allowing borrowers to start their careers with thousands of dollars in student loan debt.

However, there are several strategies that borrowers can use to pay off their loans while making other money movements.

In the near term, federal student loan borrowers can take advantage of the current pause in student loan interest and payments, which was recently extended through August 31, 2022.

The extension should help many borrowers who are struggling to pursue other financial goals; In Bankrate’s survey, 74% of eligible borrowers predicted that an extension of the student loan deferral period would have a positive impact on their personal finances.

During this time, borrowers may reallocate federal student loan payments to other financial goals.

There are other ways to manage student loan debt beyond the current payment pause.

For example, if you’re saving for a home and are struggling to make your monthly federal student loan payments, the US Department of Education offers income-tested repayment plans that base your monthly payments on income and family size.

The reduced monthly payment can give you some wiggle room in your budget to set aside more for a down payment each month.

If you have personal student loans, consider refinancing if you are offered better terms and a lower interest rate.

If you have a financial goal of strengthening your savings or emergency account, refinancing could allow you to fund those accounts faster by saving money on interest charges or choosing a longer repayment period to lower your monthly payment.