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A new survey concludes that education spending is the number one financial disruptor for Americans. The survey, conducted by The Harris Poll on behalf of TD Ameritrade, defines an individual as financially disrupted if they have experienced a situation that has a negative impact for the long-term or on retirement.
When surveyed, the most popular selection for a financial disruptor was “education for self and/or dependent family members, e.g. student loan debt”, which was selected by 16% of those surveyed.
Millennials were the most financially disrupted generation, which comes as no surprise since nearly 45% have student loan debt.
“Today, many young Americans are struggling to save for the future while paying off their past,” said Tom Butch, managing director of retail distribution at TD Ameritrade in a press release.
“Between paying down student loans, contributing to retirement and saving for their children’s college, they are striking a delicate balance to set themselves on a path to long-term financial security.”
Student Loan Debt is a Financial Disruptor
Collectively, 45 million student loan borrowers owe $1.6 trillion in both federal and student loans. More than two-thirds of college graduates have an average of $29,900 in student loan debt. The average parent loan debt is even higher at $37,200 at graduation. The average graduate school student loan debt is at $84,300 while the average medical school debt is at $246,000.
Studies have shown that student loans are delaying financial goals for borrowers, including getting married, having children, buying a home and pursuing higher education. Student loan debt is to blame in one in eight divorces as well.
Other generations, not just millennials, are also dealing with student loan debt as a financial disruptor. There are 3 million seniors in America with student loan debt. In 2015, 37% of those 65 or older with student loan debt have defaulted on their student loans. This student loan debt is from borrowing for their own professional or graduate degrees, borrowing parent loans for their children and sadly, from cosigning student loans that go unpaid by the primary borrower.
Besides education, other financial disruptors include loss of employment or a lower paying job, supporting others, poor investment or business performance, an accident or disability and the inability to work, divorce or death, planned family or a planned home.
The Bright Side
On a positive note, those who are financially disrupted are also more prepared for a future financial disruption than in 2014. The results include:
- 48% in 2019 had a steady, reliable income vs. 40% in 2014
- 45% in 2019 had money/savings put aside “for a rainy day” vs. 33% in 2014
- 25% in 2019 had to stop saving/investing for the long-term/retirement vs. 38% in 2014
- 20% in 2019 had to withdraw money from their retirement savings in 2019 vs. 26% in 2014
If you are struggling with student loan debt, there are ways you can lower your student loan payments, including enrolling in an income-driven repayment plan, temporarily going on a deferment or refinancing student loans to lower your interest rate. Keep in mind that refinancing any federal student loans means a loss in many benefits – income-driven repayment, any federal forgiveness programs, generous deferment options, and more.
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