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The American Dream has long been touted as an opportunity for everyone in our society to achieve their version of success, regardless of the circumstances they were born into. Hard work yields upward mobility — or so we’re taught to believe.
But what if you put in the hard work, and you’re not much better off? That’s the case for millions of student loan borrowers who have found the American Dream to be more fantasy than reality.
Student loan debt delays major milestones
For decades, Americans have invested in postsecondary education as a means to improve their career prospects and lifetime earnings. But median income has not kept pace with high inflation, rapidly rising housing costs, and skyrocketing tuition rates. After adjusting for currency inflation, college tuition has increased almost 750% since 1963.
Data we collected in partnership with our Accelerator client Savi, a social impact technology startup, shows the ripple effect these financial factors have on student loan borrowers who are delaying important financial milestones. In our survey of over 3,000 student loan borrowers, we found that 55% of respondents reported a delay in saving for retirement; 52% reported a delay in buying a home; over 40% reported a delay in buying a car; and 36% reported a delay in moving out of the house of their parent/s or guardian/s.
Student loans are also delaying traditional milestones associated with the “American Dream.” Thirty-nine percent of respondents reported student loans delayed them from pursuing a career they were passionate about; 34% were delayed in starting or expanding their family; and 29% were delayed in getting married or registering as domestic partners.
The exponential impact of student loan debt
No or little retirement savings, combined with a dwindling social security fund that continues to be threatened, could result in a generation of borrowers forced to work until they die.
As reported by The Hechinger Report, 74-year-old Marjorie Sener has given up on the hope of retiring. She’s still working and making payments on her student loan — which has grown to 10 times the original amount due to compounding interest — as she struggles with other expenses, including expensive medical bills for cancer treatment. Sener doesn’t own a home and is also paying off an auto loan. One of her biggest financial goals now is to save up enough to pay for her own funeral costs.
Delaying financial milestones has an exponential impact. The longer borrowers put off saving and investing, the less wealth they will accumulate over their lifetimes. Their children, if they choose to have them, will likely witness their parent(s) struggle to achieve their goals and also have limited access to financial support from their parent(s) for their own higher education. This perpetuates a vicious cycle.
Yet in the long run, earning a degree is almost always worthwhile. According to a report from the Georgetown University Center on Education and the Workforce, bachelor’s degree holders generally earn 75% more than those with just a high school diploma. And while an increasing number of companies and industries are dropping degree requirements, most high-paid jobs still go to college graduates. In fact, a new report from the Georgetown University Center on Education and the Workforce predicts workers with 4-year degrees will hold most good jobs in 2031. However, the results from our survey, along with numerous other data sources, make it clear that more can be done to improve the return on investment of obtaining a degree.
Addressing the student loan debt crisis
The student loan system is complex and confusing. Educating borrowers on the long-term impact of their loans, the available options for repayment, and the resources they can access can make a huge difference. In previous research we released based on the same data, we found that only 28% of borrowers were aware of all their repayment options. A significant number of borrowers, therefore, may be leaving money on the table. Financial literacy education can not only empower borrowers to better repay their loans, but it can also protect them from servicers who don’t have their best interests in mind.
Of course, if borrowers had their loans forgiven — a plan that could be repealed as early as January 2025 — they’d be able to reap the benefits of their education more quickly. Regardless, there’s much more we could be doing to deliver on the promise of higher education. Higher education leaders, policymakers, borrower advocates, and even employers should push for greater college affordability, modernize the financial aid model, and explore more opportunities for wrap-around support to help students with basic needs expenses such as rent, groceries, and utilities.
A majority of Americans already don’t believe college is worth the cost. If student loans continue to thwart borrowers’ futures, later generations may decide college simply isn’t worth the cost and miss out on the opportunities higher education can unlock — killing the American Dream once and for all.
