Study Shows Student Debt Can Kill 75% of Millennials’ Average Net Worth

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Millennials with student loans…


It’s no secret that millennials are swamped with student loan debt. While more millennials have obtained bachelor’s degrees than those in generations past, they also borrowed the most to earn those degrees. As of 2018, outstanding student loan debt in the U.S. surpassed $1.48 trillion, almost one-and-a-half times what Americans owe on credit cards.

According to an analysis of Federal Reserve data by MagnifyMoney (which, like Student Loan Hero, is owned by LendingTree), all this debt is hampering millennials’ chances for long-term financial success.

In fact, this study revealed that the average net worth of a millennial with student loans is only 25% of the net worth for a fellow millennial without them. What’s more, the data suggest student loan debt is preventing some millennials from saving for retirement or buying homes.

And while it’s likely that those without student loans tend to include more people from wealthy homes, the massive disparity between those who owe and those who don’t suggests that educational debt can supercharge the difference in income.

If you’re a millennial, your financial journey since graduation has probably been an uphill battle. Here’s how student loan debt has held your generation back, along with our advice on how to conquer your debt once and for all.

Key facts

Millennial households with student loan debt have…

  • An average net worth of $29,087, compared with $114,376 for student loan-free households.
  • 46% less in their savings and checking accounts (median balance of $5,500 vs $10,180 for those without student loans).
  • $21,160 in retirement savings versus an average of $39,905 for those with no student loan debt.

Student loans weigh heavily on millennials’ net worth


The wealth divide between households with student loan debt and those without it has been widening over the past few decades.

In 1989, under-35 households with student loan debt had just 13% less in average net worth than households without any student loan debt.

That difference had nearly tripled by 1998, when under-35 households with student loan debt had a net worth 36% less than their debt-free peers. The former had an average net worth of $68,687, while the latter held an average of $108,146.

In 2016, the gap had grown to 75%, with student loan-saddled millennial households having an average net worth of $29,087, compared with $114,376 for student loan-free households. In other words, millennials unburdened by student loans held over $85,000 more than those who still had debt from college or graduate school.

Even though a college degree typically leads to a higher-paying job, the student loans that often go with it can significantly undermine your ability to build wealth after graduation.

Student loans mean less money in the bank (and more credit card debt)


If you’ve got student loans, you know those payments can be a struggle to make month after month. According to our analysis, millennials with student loans are putting a significant amount of their paychecks toward their debt — leaving them with less money in the bank.

In fact, holders of student loans had 46% less in their savings and checking accounts in 2016 than millennial college graduates without debt. The former group had a median bank balance of $5,500, while the median for other millennial grads was nearly twice that, at $10,180.

Perhaps because millennial borrowers have less liquid cash, they also end up taking on more credit card debt. Fifty-five percent of those with education debt also had credit card debt, compared with just 32% of those without student loans. They also carried larger balances — $2,888 — as opposed to $1,476 for debt-free millennial graduates.

If student loan bills are eating up a big part of your income, you might use credit cards to finance big purchases. But credit card debt tends to be even harder to pay off than student loan debt because of high interest rates and the temptation to overspend. Caution is key when it comes to paying with plastic.

Student loans get in the way of saving for retirement


Considering that millennials with student loans have less money in the bank, it should come as no surprise that they also have less saved for retirement. After all, once you’ve paid your student loan bill and other recurring monthly expenses, you might not have much left over to contribute to your 401(k), individual retirement account (IRA) or other nest egg account.

Our analysis found that millennials with education debt have an average of $18,745 less in retirement savings than their debtless counterparts. The average grad with debt had saved $21,160 in 2016, while those without student loans had an average of $39,905 in their retirement savings accounts.

When it comes to preparing for the future, the earlier you can start, the better. Thanks to the power of compound interest, any amount you can set aside today can grow significantly over time.

Student loans seem to be an obstacle to homeownership


When it comes to buying a home of their own, millennials can encounter many challenges.

The high cost of rent is one of them, with nearly 21 million households paying more than 30% of their income on rent, according to Harvard’s Joint Center for Housing Studies. While rent costs have gone up, wage growth has remained stagnant, even for those with college degrees. This makes it all the more difficult to save for a down payment and other costs associated with buying a home.

And student loans create further obstacles, resulting in lower rates of homeownership among millennial graduates with student loans (34%) than among those without (36%). Those who have managed to buy a home end up with a lower-value home and a bigger mortgage, compared to their contemporaries who don’t carry education loans.

According to MagnifyMoney’s analysis, the home values of millennials younger than 35 with student loan debt are 5% lower than those without student loan debt. The median value for those with student loans was $157,000 in 2016, while millennial homeowners without student debt had homes with a median value of $165,000.

What’s more, homeowners with student loans had to take on even more debt to buy their homes, possibly because they weren’t able to save as much for down payments. Their median mortgage was $104,000, versus $98,000 for those without student loans.

Not only does student loan debt get in the way of buying a home, but it also forces millennials to take on even more debt to realize their goal of owning a home.

Get proactive about reducing your student loan burden


Although you might feel you got tricked into taking on debt at a young age, burying your head in the sand about your student loans will only make a difficult situation worse. Instead of giving up hope, try to get proactive about paying off your debt.

If you can make extra payments, you can get out of debt faster and save money on interest. Create a budget to see if you can spare any extra cash each month. Look for areas where you can cut down on spending. Some people even take drastic steps, such as downsizing their apartment or selling their car, to get rid of debt as fast as possible.

If you’re working, find out what steps you can take to get a pay raise. Or consider changing jobs altogether to boost your salary. Alternatively, you might take on a side hustle, such as driving for Lyft or running errands for TaskRabbit, to increase your income and throw that extra money toward your loans.

Another option is to move into a career that could qualify for student loan forgiveness. For instance, those who work in public service fields or as teachers in qualifying schools could be eligible for federal student loan forgiveness.

You can also look into state-based and private programs that offer student loan repayment assistance for your private or federal student loans. And some employers even offer a student loan matching benefit to help you pay off debt.

Finally, some borrowers could benefit from refinancing their student loans. If you have decent credit and a steady income — or can apply with a cosigner who does — you could qualify for a lower interest rate than what you have now, as well as choose new repayment terms. As a result, refinancing could save you money on interest and help you pay off your student loans ahead of schedule.

Whatever you decide, make sure you’re being strategic about the best way to manage student loan repayment. Even though student debt has held back millennials in major ways, there are steps you can take to overcome this obstacle and reclaim your financial freedom.

Methodology: MagnifyMoney examined the Federal Reserve’s Survey of Consumer Finances to compare households headed by someone under age 35 with student debt versus those without. All monetary amounts are expressed in 2016 dollars (the date of the latest survey).

This article originally appeared on MagnifyMoney. Both MagnifyMoney and Student Loan Hero are part of LendingTree.

Interested in refinancing student loans?

Here are the top 6 lenders of 2019!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance:

    Fixed rates from 3.899% APR to 8.074% APR (with AutoPay). Variable rates from 2.540% APR to 7.115% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.540% APR assumes current 1 month LIBOR rate of 2.49% plus 0.04% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. SoFi rate ranges are current as of March 11, 2019 and are subject to change without notice.

  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


3 Important Disclosures for Laurel Road.

Laurel Road Disclosures

FIXED APR
Fixed rate options consist of a range from 3.75% per year to 5.80% per year for a 5-year term, 5.14% per year to 6.25% per year for a 7-year term, 5.24% per year to 6.65% per year for a 10-year term, 5.30% per year to 7.05% per year for a 15-year term, or 5.61% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan). The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 5.80% per year for a 5-year term would be from $183.04 to $192.40. The monthly payment for a sample $10,000 loan at a range of 5.14% per year to 6.25% per year for a 7-year term would be from $142.00 to $147.29. The monthly payment for a sample $10,000 loan at a range of 5.24% per year to 6.65% per year for a 10-year term would be from $107.24 to $114.31. The monthly payment for a sample $10,000 loan at a range of 5.30% per year to 7.05% per year for a 15-year term would be from $80.65 to $90.16. The monthly payment for a sample $10,000 loan at a range of 5.61% per year to 7.27% per year for a 20-year term would be from $69.41 to $79.16.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

VARIABLE APR
Variable rate options consist of a range from 3.48% per year to 6.30% per year for a 5-year term, 4.85% per year to 6.35% per year for a 7-year term, 4.90% per year to 6.40% per year for a 10-year term, 5.15% per year to 6.65% per year for a 15-year term, or 5.40% per year to 6.90% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.48% per year to 6.30% per year for a 5-year term would be from $181.83 to $194.73. The monthly payment for a sample $10,000 loan at a range of 4.85% per year to 6.35% per year for a 7-year term would be from $140.64 to $147.77. The monthly payment for a sample $10,000 loan at a range of 4.90% per year to 6.40% per year for a 10-year term would be from $105.58 to $113.04. The monthly payment for a sample $10,000 loan at a range of 5.15% per year to 6.65% per year for a 15-year term would be from $79.86 to $87.94. The monthly payment for a sample $10,000 loan at a range of 5.40% per year to 6.90% per year for a 20-year term would be from $68.23 to $76.93.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.


4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.

All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.


6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of March 1, 2019, the one-month LIBOR rate is 2.48%. Variable interest rates range from 2.98%-9.72% (2.98%-9.72% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 3.89%-9.99% (3.89%-9.99% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled. Applicants with an Associate’s degree or with no degree must have made at least 12 qualifying payments after leaving school. Qualifying payments are the most recent on time and consecutive payments of principal and interest on the loans being refinanced. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply. Borrowers whose loans were funded prior to reaching the age of majority may not be eligible for co-signer release. Note: co-signer release is not available on the Student Loan for Parents or Education Refinance Loan for Parents.

2.54% – 7.12%3Undergrad
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2.98% – 9.72%6Undergrad
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