Student Loans for Generation Z
College costs and student loans have been a highly debated topic in the past several years, with the conversation becoming heightened in the past few months. In late April 2022 there has been talk of forgiving up to $10,000 of student loan debt through executive order. This has been met with both praise and criticism. The newest generation facing the cost of higher education has some specific opinions about the concept of the government paying off student loans.
Generation Z is comprised of individuals who are between the ages of 9-26 years old. These individuals are coming into adulthood and are being faced with having to make challenging decisions regarding their future, their occupation, and their finances. Student loans and borrowing for higher education is just one of the concerns that Generation Z has to consider. Spectrem Group wanted to understand the attitudes and behaviors of this segment of investors and focused on those investors who are between the ages of 18-26 and have at least $60K in income for an individual, or $100K for a couple. Generation Z investors could also qualify based on their parents having investable assets over $500K.
Spectrem found that half of these investors currently have student loans. The percentages of Generation Z investors that have a student loan vary by income. Those investors who have an annual income below $60K are the most likely to have student loans, with 60 percent indicating such. There is little difference once an investor has at least $60K in income regarding having student loans. There are also differences based on anticipated inheritance. Among Generation Z investors who anticipate receiving an inheritance the percentage that have student loans is 58 percent. In contrast, only 40 percent of those that do not anticipate receiving an inheritance have student loans.
The greatest variance between Generation Z investors having student loans is by occupation. Only seven percent of Generation Z investors in Information Technology have student loans, while 42 percent of Business Owners have student loans. The occupation with the highest percentage of investors having student loans is in the field of Healthcare, not including physicians, with 60 percent of Generation Z investors in healthcare having student loans. Despite these significant differences in who has student loans there is not much difference in sentiment towards the idea of the government paying off student loans.
The majority of Generation Z investors agree with the concept of the government paying off student loans, with 78 percent agreeing with this idea. Only four percent disagree, and 17 percent are neutral to the concept. For those investors who are making over $150K in household income, only 69 percent agree with the government paying off student loans and nearly a quarter are neutral to the topic.
The debate will likely continue regarding the government’s involvement in student loans and loan forgiveness. Investors need to be cautious when they, or their children/grandchildren, are considering taking out loans and examine the financial ramifications of such a decision. There may be some legislation or executive action that eliminates some student loan debt but it is unlikely that all student loans will be forgiven.