Life, deferred: student debt postpones key milestones for millions of Americans

"Student debt has been solely responsible for the majority of my decision-making as an adult" (Erin – Portland, Maine).

The student debt crisis is not the burden of a single generation. It impacts Baby Boomers in their 60s and 70s; Gen Xers in their 40s and 50s; Millennials in their 20s and 30s – as well as Gen Z high school students still planning for college. Thus it’s a grave mistake to frame student loan debt as exclusively or even primarily a “Millennial problem.” At the same time, Millennials have borne the brunt of the astounding rise in college costs. They are the first generation to experience a life shaped by the near-certainty of student debt.

Weighted for inflation, college costs (including tuition and fees) rose 81% between 2001 and 2009 – the decade when well over half of Millennials graduated high school.

Traditionally, when the price of a commodity rises rapidly, demand for that commodity drops. Necessities like food and shelter are usually exempt from that general rule. However, college has become one of those essentials, with the perceived cost of not attending growing at least as fast as the actual costs themselves. As a result, student loans make the essential, attainable.

Not everyone saddled with a tremendous debt burden ends up with a degree. Whether a borrower receives a degree or not, few are in a position to rapidly repay their student loans. While a college degree may or may not expand opportunities; as we’re finding, student loan debt absolutely shuts doors that might have otherwise remained open.

Lower homeownership rates

"Growing up I was told by my parents, teachers, and guidance counselors to go to college because it would give me a better life. I graduated in 2013 with a Master's Degree in English with the hopes of being a teacher myself. There are no teaching jobs in high schools or colleges and I owe over $100,000 in student debt. I now work a job that doesn't even require a degree, and was turned down for a mortgage because my debt to income ratio was too high. Not a day goes by where I don't think about my debt" (Danielle – Roseville, California).

If homeownership is fundamental to the ‘American dream’, then student loan debt puts that dream out of reach for millions of Americans. After years of growth, homeownership rates noticeably declined in 2017. While partly due to factors unrelated to student debt (such as rising housing prices, particularly in urban areas), the rate of Millennial homeownership has fallen faster than that of the general population.

In a January 2019 study, the Federal Reserve revealed the connection between lower homeownership rates and the Millennial generation most burdened by student debt: “our estimates suggest that increases in student loan debt are an important factor in explaining (young people’s) lowered homeownership rates.” The study went on to conclude that “a little over 20 percent of the overall decline in homeownership among the young can be attributed to the rise in student loan debt. This represents over 400,000 young individuals who would have owned a home in 2014 had it not been for the rise in debt.”

While the Federal Reserve study focused on the decade between 2005-2014, a 2019 survey by Bankrate of nearly 4,000 American borrowers found that 31% of Millennial respondents postponed buying a home because of student loan debt. By comparison, when the Baby Boomers were entering the housing market 40 years ago, only 15% delayed a purchase because of student loan debt.

It’s also worth noting that the real number of Millennials unable to purchase a home because of student debt is likely much higher. While 31% of Millennial respondents reported that student debt directly delayed homeownership, this figure only accounts for potential buyers who still consider future homeownership a real possibility. Thus it does not reflect the unknown number of those whose debt to income ratio is so high that they don’t expect to ever afford a home. As Forbes noted in 2019, “no matter how many possible solutions are tossed around Washington and beyond on reducing the crushing burden of student loan debt, it remains one of the top reasons millennials are putting off buying a home.”

Historically, home mortgages defined middle-class debt. Yet due to pre-existing debt, student loan borrowers face difficulty qualifying for a mortgage. In tandem with rising housing prices, and stringent mortgage qualification requirements adopted in the wake of the 2008 economic crisis, those with already exorbitant levels of student debt face a near-perfect storm for obtaining a mortgage: placing a key component of the ‘American dream’ out of reach for millions of young Americans.

A 2018 study by Summer and Student Debt Crisis found that 56% of respondents reported that student loan debt made it more difficult to buy a home. That figure excludes those who consider homeownership so unattainable that they have preemptively “given up.” The same study notes that 58% of those surveyed experienced a decline in their credit score as a direct result of their student debt. Credit scores, based on past payment habits as well as debt-to-income ratios, are pivotal to mortgage qualification. Even borrowers who haven’t yet considered buying a home are keenly aware that their student-debt-burdened credit scores have put a mortgage out of reach.

Fewer marriages

"I have put off having children, marrying, or purchasing a home due to the high costs of student debt repayment. Regularly, I contemplate selling everything and living in my car to help free up money to pay off the debt sooner" (Melissa – Granbury, Texas).

Homeownership is not the only dream deferred, or abandoned altogether, because of crushing student loan debt.

One theme in the stories we’ve collected – and in our studies – is that student debt is an overwhelming factor in declining marriage and birth rates. Millennial borrowers like Melissa, regularly told us that there were three central dreams that debt had put out of reach: buying a home, getting married, and having children.

In 1990, 26% of adults under 65 were never married – by 2018, that number rose to 36%. Today, only one in five adults are married before the age of 30 – and the average age of first marriage has risen by more than six years since 1960. There are a host of factors that have driven the marriage rate to record lows – and we do not suggest that student debt is the sole (or even primary) driver of delayed marriage. Evolving and elevated expectations for romantic partnership, economic shifts, greater equality for women and increased acceptance of premarital sex all play critical roles in changing marriage habits. One cause of social transformation however, doesn’t negate the impact of another.

Student loan debt delays marriage in several ways. One way is through a sheer misunderstanding of the law regarding debt. Several borrowers told us they were reluctant to marry and “make my spouse responsible for my debt.” Though the laws concerning spousal responsibility vary by state, the fears of saddling a partner with one’s debts are not unfounded. Similarly, if a spouse with pre-existing debt returns to school after marriage, both the debt incurred before and during marriage gets lumped together as a shared liability.

Practically, the legal responsibility for the liability is a nominal matter. Most couples cannot simply isolate one partner’s debt. The money spent each month on student loans could be collectively used for other essentials, like rent, car repairs, or childcare.

A study released in June 2019 by the think-tank Demos showed that those who start college after age twenty (or go back to college following a break) have a particularly hard time paying off loans. Twelve years after leaving school, the average borrower (who started college after the age of twenty) will have paid off only 5% of their student debt. If a borrower is determined not to bring their student debt into a marriage, research suggest that they will have to wait a very long before they wed.

Media coverage tends to ignore that finances, rather than changing social mores, are the primary driver of diminishing marriage rates. For every young person who “never wants to marry”, statistics suggest there are far more who would like to wed someday but can’t imagine ever being able to afford to do so. A Pew Organization study in 2017 found that nearly six out of ten unmarried American adults hope to marry someday. That same report noted that unmarried Millennials cited “not being financially stable” as one of the chief reasons why they haven’t yet wed. 41% of those unmarried cited financial instability as a primary reason for remaining single, while 28% described it as a “secondary” reason. (By comparison, only 24% of young adults named “not being ready to settle down” as the primary explanation for not being married.)

The research is clear: the primary reason why Americans delay wedlock, or forego it altogether, is financial insecurity. Debt is reshaping our most intimate relationships, putting a profound source of happiness further and further out of reach.

Falling birthrates

"My wife and I have been married 3 years and she desperately wants kids. But paying out $350 a month to pay off my 45k in loans has shattered our dreams of family. We both work but it's not enough. I've paid my loans since 2004 and I'm not getting ahead" (James – Kansas City, Missouri).

With less homeownership, along with fewer marriages – it’s hardly surprising that the most debt-laden generation in history is also having far fewer babies than their parents and grandparents. Millennials are on track to have a lower birth rate than any generation in American history. In 2018, the overall birth rate in the United States fell to 59 births per 1000 women, the lowest on record and a 2% drop from the previous year.

The birth rate has fallen steadily since the start of the Great Recession in 2008. Yet even after the recovery, the birth-rate continued to decline.

There’s a disagreement as to whether the birthrate decline can be attributed to women wanting fewer babies (or wanting them later), versus women being unable to afford children. Yet the survey data is fairly compelling: most young people have had (or expect to have) fewer children than they consider ideal. In a 2018 New York Times/Morning Consult survey, four of the top five reasons respondents cited for not having as many children as they wanted focused on financial concerns:

1. Child care is too expensive (64% of respondents)
2. Want more time for the children I have (54%)
3. Worried about the economy (49%)
4. Can’t afford more children (44%)
5. Waited because of financial instability (43%)

Furthermore, a 2015 study by the National Institutes of Health examined the impact of debt on the decision to have children. The results were stunning. While mortgage holders were more likely than renters to have children, and credit-card debt had no impact among debtors, the study found that “holding student loans more significantly affects fertility at higher levels of indebtedness.” Low levels of student loan debt reduced fertility only slightly; high levels of student debt sharply reduced the chances of having a baby.

Every generation reassesses priorities. Some pundits look at the lives of Millennials and conclude that they’re simply less interested in homeownership, simply more suspicious of enduring monogamy, simply less interested in having children. The evidence shows that’s a false narrative.

The research in fact reveals that a high percentage of Millennials want homeownership, marriage, and children. The chief obstacle is not the timeless problem of finding the right person, but financial insecurity. Student loan debt is a central driver behind this precarity – affecting the fundamental milestones of our lives.

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