Apr 01, 2015 Sean Albert
Student loan debt has affected the economy and the way millennials approach credit and lenders. The massive burden many graduates have on their shoulders has also compromised their credit.
According to Fusion, a number of millennials between 25 and 30 have ruined credit scores due to student loan debts. This can certainly affect their ability to secure traditional forms of financial aid and forces them to resort to alternative credit.
The age and amount
The Federal Reserve Bank of New York reported that those between the ages of 30 and 39 are the most likely to have student loan debt at 33 percent. However, those under age 30 follow close behind at 32 percent. Fusion highlighted that in 1980, 24 percent of people between the ages of 18 and 34 were living with their parents. In 2013, however, that figure rose to 33 percent. In the past 11 years, this debt has increased significantly. In 2004, 33 percent of individuals had $200 billion worth of loans. Last year, that grew to $800 billion.There aren't any signs of the debt lessening in the future, as tuition has only increased at many higher education institutions. The weight students bear
The cost of education has forced many students to resort to government and private loans. Unfortunately, after these loans add up, students have to pay them back for years, usually starting about six months after graduation day. The Washington Times reported that many millennials have given up their preference for living in urban areas because their debts are too high to allow it. This has caused many to speculate that the "American dream" is out of reach for millennials. According to Fusion, fewer people in this age range are buying homes and cars, and they are more likely to live at home with their parents. However, the source noted that millennials are still trying to find ways to establish themselves as independents. The other options that are available
According to the FRBNY, student loan balance has tripled since 2004, at a rate of 13 percent per year. In 2014, the total student loan amount was approximately $1.2 trillion. Another report from the FRBNY found 17 percent of borrowers are 90 days overdue on their loans - which can affect their credit score. It's difficult to lay blame on students, as the bachelor's degree is becoming the new high school degree. With low credit scores - or no credit history at all - young people have to resort to alternative lending to achieve their own American dream. Whether that means buying a car, a house or just moving out of their parents' house, alternative credit helps students become established. When graduates have no where else to turn because of their bad credit due to social constructs like an expensive education, alternative lenders can help. Traditional lending only applies to certain types of borrowers, and those facing student debt often don't fit in.