Student loan debt has life-long impact on finances

The rising amount of student loan debt in the U.S. has garnered national attention as a cause for alarm. According to the Federal Reserve, student loan debt had quadrupled from 2003 to 2013. Federal Reserve data shows that student loan debt in the U.S. exceeded $1 trillion for the first time in late 2011. A new report issued in August 2013 by nonpartisan public policy group Demos entitled “At What Cost? How Student Debt Reduces Lifetime Wealth” revealed the extent to which student loan debt can cripple people financially.

Student loan debt decreases wealth

According to the report, about 66 percent of college graduates have an average of $26,600 in student loan debt when they finish school. The report’s author compared projected assets and debts of college-educated households carrying the average amount of student loan debt with similar households without that debt. The report showed that a student loan debt of $53,000 translates into a loss of $208,000 over the course of a person’s life while working and saving. About $134,000, or two-thirds, of the lost wealth is lower retirement savings for those with student loans compared to those without debt. The final one-third, about $70,000 is from lower home equity for those with student loans than those without loans.

Student loan debt affects some more than others

On a national basis, this means that the $1 trillion in student loan debt in the U.S. will result in a collective $4 trillion loss of wealth for those with student loan debt. The report noted that the model it used to predict individual losses in wealth were based on a “best case” scenario of a two-member family with each one college-educated at a four-year university and from a middle-class background. The report noted that student loan debt impacts those from low-income backgrounds, students of color and students who graduate from for-profit schools disproportionally, since those students often have to take out more loans than the national average.

Bankruptcy may be an option

Those who are struggling financially because of student loan debt often end up amassing other types of debt simply to make ends meet. Credit card bills, auto loans and personal loans can quickly add up and send a person’s finances spiraling out of control. Those who are overwhelmed with student loan debt and other types of debt may want to consider bankruptcy as a solution to their financial straits. While people generally cannot discharge their student loans in bankruptcy, filing bankruptcy can help people eliminate many other types of debts, making it easier for people to make their student loan payments.

If your financial situation is overwhelming and you feel like you have no options, speak with a skilled debt relief attorney who can advise you about the best course of action for your circumstances.