Only 39% of student loan borrowers fully understood the burden of student loan debt and the majority have at least some regret. As a result of student loans, these graduates put off retirement contributions, buying a house and marriage.
Many Americans are starting their careers being weighed down because of student loans, according to a poll by the American Institute of CPAs.
College graduates aren’t the only ones suffering from student loan debt — 41% of parents and student loan
borrowers said they have postponed contributions to retirement plans and 75% said they have made personal or financial sacrifices because of monthly student loan payments.
According to the poll results, only 39% fully understood the burden student loan debt would place on their future and 60% have at least some regret over the choice of financing.
Not too long after graduation, many college graduates become painfully aware of how much debt they are now holding, according to Ernie Almonte, CPA, CGMA, chair of the AICPA’s National CPA Financial Literacy Commission.
“They start out with an anchor that slows their progression toward future goals,” he says. “It’s a difficult reality confronting a growing number of people, one that will come into sharp focus in the coming weeks as the nation’s colleges and universities produce a new crop of graduates.”
At the end of 2012 the number of adults with student loan debt was up 70% from 2004, according to statistics from the Federal Reserve Bank of New York. The average student loan balance is $24,803 and the overall amount of student loan debt is now $966 billion.
“Education can be a powerful investment that improves job prospects and earning potential,” Almonte continued. “But the payoff is diminished if you’re also burdened by debt that takes decades to pay off.”
Almonte suggests that college decisions be approached like any other investment, weighing the risks, rewards and expected return. The AICPA offers the following tips to tackle student loans.
The earlier you start saving for college, the better off your children will be when they get there.
AICPA offers a few options to cut down on costs, such as attending community college for two years, attend classes part time while working part time or simply living at home.
Be judicious with loans. AICPA suggests that the total balance at the end of four years should not exceed the amount the student expects to earn the first year using the degree.
Starting payments low and increasing them over the years is tempting, but it just means you’re paying more interest. Make sacrifices in the short-term so it is easier to pursue long-term goals, the AICPA suggests.