Student debt totals $1.757 trillion in the U.S., and the average federal student loan debt balance is $37,338. Over 40 million people are directly impacted by student loan payments. However, the burden of student loan debt is not limited to students alone; it also affects their parents, who often provide financial support. Credello’s latest survey revealed that there is a significant strain on the finances and spending habits of these parents who helped their children with student loan payments in some way.
Though this week President Biden vetoed the bill that would block his $400 million student loan relief plan after the House voted to overturn it in May, it is still up to The Supreme Court in the end. According to The Hill, the conservative-heavy panel is expected to vote against Biden’s original proposal which pledged to help 40 million borrowers, providing $10,000 in loan forgiveness for those making less than $125,000 per year and $20,000 in forgiveness for Pell Grants recipients. Even if this relief plan stays in limbo for the next few months, student loan payments are a palpable strain for much of the country including parents. Here is what Credello’s survey of 600 parents found about student loans.
Key takeaways of Credello’s parents and student loans survey
- Financial Contributions: Out of the 600 parents surveyed who helped pay for their children’s education costs, 19% partially paid for their children’s student loans, and nearly 13% completely paid off the loans. Additionally, 34% of parents partly paid their children’s college tuition, while 34% completely paid it off.
- Financial Burden: The survey revealed that nearly 30% of parents spent between $10,000 to $25,000 on their children’s tuition payments, and approximately 23% of respondents spent between $25,000 to $50,000 on tuition costs. These substantial expenses highlight the financial strain parents endure to support their children’s education.
- Impact on Savings: An alarming 42% of parents surveyed reported that paying their children’s student loans or funding their tuition made saving money difficult. This financial obligation restricts their ability to build an emergency fund or save for other financial goals.
- Decreased Disposable Income: More than half of the parents surveyed (51%) experienced a decrease in their disposable income due to the financial responsibilities associated with their children’s education. This reduction in discretionary funds limits their ability to spend on non-essential items and experiences.
- Increased Stress Levels: The survey revealed that 38% of parents reported increased stress levels due to the financial obligations of supporting their children’s education. Juggling the costs of student loans or tuition payments alongside other financial responsibilities takes a toll on their overall well-being.
- No Regrets: Despite their financial strain, an overwhelming majority of parents (77%) expressed no regrets about providing financial assistance to their children. This highlights the deep-rooted desire to support their children’s educational pursuits, even at the expense of their financial stability.
- Lack of Information: The survey also uncovered that only 43% of parents felt adequately informed while funding their children’s education. This lack of information could lead to uninformed financial decisions and potentially exacerbate the negative impact of student loan payments on their overall financial health.
- Expectations for Repayment: Surprisingly, only 9% of parents surveyed expect to be paid back in full by their children, while 17% anticipate partial repayment. This suggests that parents often view their contributions as an investment in their children’s future rather than a loan that needs to be repaid.
The negative impact on consumer spending
Given the insights from Credello’s survey, it is evident that the resumption of student loan payments will have a negative impact on consumer spending. Parents supporting their children’s education will face additional financial burdens, reducing their ability to contribute to the economy through discretionary spending. The decreased disposable income and increased stress levels reported by these parents will likely result in a more cautious approach to spending and a focus on meeting basic needs rather than indulging in non-essential purchases.
Moreover, the inability to save adequately due to student loan payments or tuition expenses will limit parents’ ability to invest in their own financial future, which can further dampen consumer spending. Reduced spending power within this demographic could have ripple effects on various industries, such as retail, travel, and hospitality, which heavily rely on consumer expenditure.
Credello’s survey on parents and student loans sheds light on the significant financial strain experienced by parents who support their children’s education. As student loan payments resume, the negative impact on consumer spending is expected to be substantial. The burden of student loan debt affects individuals and has broader implications for the economy. Policy interventions and increased financial literacy efforts may be necessary to alleviate this burden and create a more sustainable system that supports students and their families in pursuing higher education.