‘Tis the season for higher spending and stressful shopping. According to the latest survey from Student Loan Hero, 41 percent of respondents rate their holiday shopping stress level a 7 or higher on a scale of 1 to 10. In fact, 40 percent of those with student debt have even thought about skipping a loan payment during the holidays.
Part of that stress comes from the presence of student loan debt. Consumers with student loans are more likely to turn to other sources of debt, including credit cards and personal loans, to help them pay for holiday spending — the survey showed they’re also more likely to try to save money by selling presents they receive or re-gifting items. Additionally, many consumers, like last year, expect to carry their holiday debt into the new year.
Here are some of the key takeaways from our survey on holiday spending and student loans.
Student loan borrowers more likely to take on holiday debt
While only 37 percent of those without student loan debt plan to spend more than last year, 55 percent of those with student loan debt think they will spend more money on the holidays this year.
Nearly half (45 percent) of those without student loan debt said they plan to use credit cards for holiday expenses. That number jumps to 69 percent when looking at those with student loan debt planning to use their credit cards to make purchases for the holidays. And 33 percent of those with student loan debt will spend more than $500 on their credit cards, while only 22 percent of those without student loan debt plan to spend more than $500 on their credit cards this holiday season.
Additionally, 18 percent of respondents without student loan debt have taken out personal loans for holiday expenses — among those with student loan debt, that number almost doubles to 33 percent.
According to Daniel Levine, director of the global trends consultancy Avant-Guide Institute, this information squares with what he’s seen before. “People who already have debt are more likely to continue using debt,” he said. “So if you already have student loans, you are likely to feel comfortable using credit cards to make your purchases, even if it means you spend a little more.”
On the other hand, whether or not you have student debt doesn’t seem to impact how long it will take to pay off the holiday spending. Thirty-seven percent of all respondents said they would not pay off their holiday spending credit purchases immediately, more or less the same as when looking at just those with student loans. And over one-third (39 percent) of those surveyed said it would take more than six months to pay off their holiday expenses.
Carrying balances leads to interest charges and increased overall costs for the holidays. For more than a third of consumers, whether or not they have student loan debt, holiday spending will continue to impact them halfway through next year.
Making a plan to pay off credit card debt as soon possible can help alleviate some of the holiday stress. About 6 out of 10 respondents said they hoped to have their holiday spending paid off within six months.
Student loan debt prompts re-gifting and selling presents
In addition to being more likely to spend using credit, student loan borrowers are also more likely to change the way they receive gifts during the holiday season.
First of all, 29 percent of respondents without student loan debt said they have either re-gifted or sold gifts received in the past, and/or are planning to do so this year. However, that number jumps to 58 percent for those with student loan debt.
On top of that, many respondents want gifts that will save them money, such as a gift card to a grocery store. While less than two-thirds (59 percent) of all respondents said they’re likely to ask for gifts that will help them live frugally, that number rose to 77 percent for those with student debt.
Levine said it makes sense for people to want to avoid physical items in favor of gift cards. “More and more people, especially millennials, prize gifts of experience,” he said. “A gift card lets the recipient not only choose what they want to buy, but it also gives them a chance to enjoy an experience, rather than figure out how to store things they probably won’t even use.”
Trying not to break the bank during the holidays
Student loan debt can make budgeting a challenge during the holidays. It seems there are constant demands on our pocketbooks during this time of year, from gift-giving to holiday parties to buying decorations. It’s little surprise that 40 percent of those with student debt have thought about skipping a student loan payment to afford holiday expenses.
This year looks to be a more expensive year than last year for holiday spending as well, according to our survey. Thirty-seven percent of respondents without student loan debt said they will spend more this holiday season. Interestingly, among those with student loan debt, more than half (55 percent) plan to increase their holiday spending over last year.
But that doesn’t mean holiday spenders are just throwing money around. Many holiday shoppers plan to give up things to save money during the season:
Top things people are willing to give up to save money during the holidays include:
- Eating out
- Buying clothes
Only about one-quarter of respondents showed a willingness to give up buying gifts to save money during the holidays. Shoppers are more likely to sacrifice their comfort rather than deprive their loved ones of holiday cheer.
Additionally, the creation of rules around holiday spending seems to help shoppers rein themselves in. Seventy-four percent of all respondents said they do this, while among those with student debt, 82 percent set spending rules.
However, the specific gift-giving rules used seem more or less the same whether or not respondents have student loan debt. The chart below shows how this breaks down:
Most of our respondents seemed to favor setting rules that are “fair” by spending the same amount for each person on their list. However, some believe that they can reduce their obligation to spend on gift giving by letting those closest to them know that they are trying to save money or pay off debt. So far, it looks as though very few consumers will skip holiday spending altogether in the name of saving money.
However, even if you plan to spend, it doesn’t have to break the budget. Check out some of our helpful articles on making the most of the holidays:
- Budgeting for the Holidays: Your Ultimate Guide
- 7 Ways to Survive the Holidays if You’re Tight on Cash
- 5 Ways Low-Cost Holidays is Actually Possible
- 8 Holiday Money Gift Ideas for Broke Post-Grads
Student Loan Hero conducted this survey via Survey Monkey on October 11, 2017, and collected responses from a nationally representative sample of 1,050 adults living in the United States. The survey results have a margin of error of ±3 percent.
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3 Includes AutoPay discount. Important Disclosures for Payoff.
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All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
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*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
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Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.