Student debt is crippling young people’s wealth for years after they graduate, a Pew Research Centre report has found.
The study analyzed data from the 2010 Survey of Consumer Finance and found young adults owing student debt trail way behind their peers when it comes to wealth accumulation.
Graduates with no student debt accumulate roughly nine times as much wealth as those who do, the report found.
In the U.S. 37 per cent of households headed by someone younger than 40 had outstanding student loans in 2010, up from 22 per cent in 2001. The median amount of debt for these households is $13,000.
Student debt has now surpassed credit card debt, and is now only second to mortgage debt as the largest type of debt owed by American households.
Canadian graduates are doing somewhat better than their American counterparts, but that doesn’t mean student debt repayment isn’t an issue. 1 in 8 Canadian families has student loans with a median value of $10,000, only slightly less than our neighbours to the south.
In 2012, Canadians owed $28.3 billion in student loans, up 44.1 per cent from 1999.
Ontario university graduate Jessica Macleod is struggling to pay off her student loans. She graduated in 2013 with $35,000 in and because of limited job opportunities, that number hasn’t really decreased at all.
“The lowest payment I can make each month is $330 and for someone who is living on their own and trying to support themselves—it’s pretty high.”
Young people held back by student debt may also delay moving onto the next stages in life like buying a first home or starting a family.
A 2013 study by Royal Le Page found 72.4 per cent of those polled born between 1980 and 1994 (aged 20-34) were pessimistic about their ability to own a home because of housing prices.
Twenty-five-year-old Macleod at the age of twenty-five feels the same way.
“Because of my debt I’m treading water: I currently pay rent, home-ownership is not feasible, and the bus will be my mode of transportation for a while .”
In the end she thinks going to university was worth it, but if she could do it again she’d be smarter about it.
“I wish I would have taken a year off after high school and worked to make enough money to pay for my tuition, I’d be in a better financial situation than I am now.”