Debate on Student Loans


 One of the major financial struggles younger investors are facing is a significant amount of student loan debt.  According to recent research from Spectrem Group, 59 percent of Millennials and 44 percent of Gen X investors had to take out loans for college. This is a topic that impacts many investors, regardless of wealth levels, as investors at higher wealth levels are more likely to indicate they took loans for college. Sixty-eight percent of those investors with a net worth between $5MM-$25MM indicating they took loans for college. Being aware that this topic impacts the majority of young investors makes it even more apparent to become knowledgeable about the various issues surrounding student loans, as well as how other investors view the various issues.

One of the biggest debates in the student loan conversation is about government help.    There have been proposals from a variety of politicians that the governmental should pay off up to $50,000 in student loans. This is a sentiment that is shared by 85 percent of wealthy Millennials, and 54 percent of Gen Xers. Lower levels of wealth are less likely to agree with the idea of the government paying off people’s student loans, with only 45 percent of investors with $100,000-$1M in net worth agreeing with this concept, while 89 percent of those with a net worth between $5M-$25M feel that the government should pay off up to $50K in student loans. It is not surprising that the investors who are the most passionate about feeling that the government should pay off $50K in student loans are those individuals who have student loans. Ninety percent of those who have student loans believe the government should pay off up to $50K in student loans, while only half of those investors who did not take student loans agree with that concept.

What about financing help from the government? Millennials are more likely to feel that those who receive help from the government should have to pay it all back, with 79 percent feeling that way. Gen X investors are slightly less likely to feel that individuals should have to pay the government back for any help they receive. Interestingly, those who have had to take out loans are far more likely to feel that an individual who receives help from the government for their college education should pay it back than those who have not, 85 percent and 59 percent respectively.

 Another concept that has been discussed is the idea of basing the amount a student can borrow on the earning potential for the field that they are majoring in. The concept behind this idea is the belief that those who have higher earning potential should be able to borrow more because their ability to pay the loans off will be higher, while those majoring in fields that do not have very high earning potential might struggle to pay off loans with high balances. Three quarters of Millennials feel that this concept would be a good one, while 61 percent of Gen X investors feel that way. Again, those investors who have taken out loans are the most likely to feel that borrowing ability should be connected to earning potential, with 79 percent indicating agreement with this concept.

Student loans and the cost of higher education is a topic that many investors have to address in one way or another throughout their financial lives, either for themselves or their children. Taking out student loans is not limited to investors at lower levels of net worth or income. This topic and the utilization of student loans is something that bridges all wealth levels, and as such is something that everyone needs to be paying attention to.