DULUTH, Ga. (6/6/13)--More than 22% of respondents to a Georgia Credit Union Affiliates (GCUA) survey said they have an existing student loan, and 12.8% said they are not on track to pay it back. And a separate Wells Fargo survey indicates about one third of millennial respondents wish they had entered the workforce instead going to college.
More than 5% of respondents owe between $10,000 and $20,000, and 10% of respondents owe more than $20,000, the GCUA survey revealed.
"Falling behind on your student loan payments can be very costly," said Michael Huff, project management manager of Associated CU in Norcross, Ga. "It also damages your credit, which can have negative ripple effects to all aspects of your financial life."
The soft job market has led many people to choose extended repayment plans of up to 25 years, Huff explained. "The extended payment option can turn a $25,000 student loan debt into $52,000 in total amount paid," Huff added. "And 25 years spent in paying off college debt can really impact their borrowing power for future purchases like a new car or home."
As student loan balances increase and job prospects continue to look bleak for young graduates, it is harder for students to repay the money it took to complete their degrees, GCUA said.
Tuition costs have risen by more than 26% since 2005. As a result, student loan debt is rising too, currently estimated at $986 billion, according to the National Center for Education Statistics. A recent study by TransUnion reports more than half of all student loans are now delinquent or in deferral.
While students are borrowing twice what they did a decade ago, they face more challenges in repaying their debt. A study by the Associated Press found 53.6% of Americans under age 25 are either unemployed or underemployed. Many young Americans graduate with their degrees only to find it impossible to repay their student loan debt, GCUA said. More than 13% of graduates default on their student loans within three years of leaving college, according to the U.S. Department of Education.
Also, roughly one out of three millennials (between the age of 22 and 32) of the 1,414 surveyed in a recent Wells Fargo study said they now believe they would have been better off directly entering the workforce after high school instead of going to college (LoneStar Leaguer May 29).
The reason for that that about-face is that more than half of those surveyed used student loans to finance their college education, and that many found they created a an overwhelming financial burden. Currently, U.S. student loan debt is totaling roughly $798 billion--exceeding U.S. credit card debt.
The Credit Union National Association's first annual High School Student Borrowing Survey, released in April, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.
In a recent meeting with Consumer Financial Protection Bureau officials, CUNA said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased.