When Brad Stroh and I founded Freedom Financial Network in 2002, the business was based in large part on one incredibly simple truth: there are many, many more ways that consumers can get themselves into debt than there are for them to get themselves out of it.
Our analytics have come a long way since then. Over the last two decades, Freedom has become an industry leader in gathering, analyzing, and reporting on consumer finance data, largely because looking ahead and projecting the next macroeconomic issue that could get consumers into financial trouble prepares us to be in the best possible position to help.
Throughout our almost twenty-year journey working with financially vulnerable consumers and consumers who are in the midst of severe financial hardships, we’ve observed firsthand the impact of student loan debt on our clients and their families. Unfortunately, the trend is continuing to get worse. The New York Fed released its 3Q 2019 Analysis, which found that total student debt jumped $20 billion last quarter to $1.5 trillion. Americans now carry significantly more total student loan debt than either credit card debt or auto debt. More worrying, the New York Fed found that student loan debt delinquencies are growing at a faster rate than other types of consumer debts it tracks. According to their data, 9.9 percent of student loan accounts became “seriously delinquent” last quarter (at an annualized rate).
The macro data mirrors what we are seeing at Freedom Financial Network. Even after our clients resolve tens of thousands of dollars in credit card, medical, or other unsecured personal debt, many still find themselves responsible for a mountain of student loan debt – with few options to help them reduce it or pay it back. In fact, nearly 50 percent of clients enter our program with student loan debt, carrying on average a balance of more than $43,000.
To get a better sense of the scope of this issue, we recently commissioned a public opinion survey to better understand the impact of student loan debt on individuals and their families. The results show that student loan debt is not only weighing heavily on students, but parents as well.
Along with Atomik Research, we asked 1,003 college attendees/graduates and 500 parents how the cost of college and student debt are impacting their lives, both personally and financially. Sixty-seven percent of attendees/graduates said the cost of college has caused them to feel overwhelmed about their financial situation and 40 percent of parents reported that the cost of their child’s education has delayed their retirement age.
But even this data, as eye opening as it is, underrepresents the true scope of the macroeconomic problem. For the growing number of Americans, both graduates and their parents, who either have student loan debt or are assisting their children in paying it back, many also struggle to save money. The data we gathered indicates that 3 in 5 students/graduates said they can’t save any money because of the cost of their college education, while one-third of parents said they can’t build any savings because they’re helping to pay for their children’s education.
Interestingly, our survey also suggests that an entrenched narrative about younger generations – that they have little interest in committing to long tenures with one employer – is wrong, at least when it comes to those with student debt. More than half of the respondents in our survey said they would commit to an employer for more than four years if they paid off their student loans. For a generation generally painted as non-committal, this finding represents just how focused students and recent graduates are when it comes to the impact that their student loan debt will have on their financial lives.
Our survey also found that the impacts of the student debt crisis are not just limited to the financial realm, either. The burden of student debt is having a shockingly significant impact on the mental state of Americans. Forty-seven percent of graduates/students said their college education cost has contributed to mental or emotional health issues, while 38 percent said it has caused them to lose sleep. Beyond the macroeconomic implications, the data clearly tells us that we should think of student debt as a societal issue that impacts more than just Americans’ bank accounts.
Though we all understand, on a macro level, the impact that student loan debt is having for many Americans, I was genuinely shocked by the results of our survey. Our work at Freedom involves advocating for some of the most financially vulnerable consumers across the country, and the data that we gathered demonstrate just how many more Americans are already either experiencing or on the brink of financial hardship due to student loan debt. As a financial services industry, and as a country, we have to do better. Freedom will be announcing several initiatives in the weeks ahead to help at-risk consumers better manage their student loan debt, and I also look forward to working alongside policymakers and fellow business leaders to determine solutions that will make a lasting impact more broadly across the country.