By Kristi Waterworth – Published August 26, 2024

Approximately 43 million Americans currently have student loan debt. (1) That’s roughly 12.5%, or one in eight people that you see walking around every day. You would think that this much student debt would equate to an educated society and jobs that return well on this massive financial and social investment, but you’d be wrong.

Unfortunately, student debt is yet another contributing factor to why so many people are living paycheck to paycheck in the United States, considering that the average student loan debt is $37,853 per borrower (2) and they, on average, were making just $55,260 per year as of 2020. (3)

Put another way, college graduates are making $4,605 monthly, before taxes are taken out, and then must pay about $435 per month if their student loan balance is $37,853 at 6.8% over 10 years. (4)

Roughly 10% of their income is going to student debt. This is seriously hindering their path to Financial Freedom.

How student debt is affecting America
It might be easy to assume that student debt only affects the borrowers and their families, and you’d not be wrong for thinking that. But the problem with rising student debt costs and low wages for college grads is that it has a significant knock-on effect.

A recent survey by Realtor.com found that student debt burdens are actually causing a great deal of chaos in the economy – all in small ways that add up to be enormous. For example, when surveyed, student debt holders told Realtor.com that their debt affected their ability to do a lot of the things the rest of us take for granted. (5)

More than a quarter of contributors said that they were less able to take a vacation, purchase a car or purchase a home, and more than 20% said their debt affected their ability to purchase clothing or start a business.

Of course, things like being unable to purchase a house mean that the debt holder is also not buying things for their house, like furniture, or doing home repairs, or hiring tradesmen to help with service issues; not being able to buy a car might mean not paying a mechanic regularly, not buying gas, or not contributing to taxes via tolls.

The financial and emotional effects of student debt on the debt holder is massive, but the knock-on effects to absolutely everyone are enormous.

What is causing low pay for highly educated workers?
There are a lot of things that can be pointed to as contributing to lower pay for highly educated workers, including a rise in unemployment in formerly high-paying sectors like tech. The tech sector has always been considered a fairly secure and well-paying area for college graduates to jump into, but with tech unemployment reaching post-pandemic highs twice this year, it’s harder for students who have already graduated in this field to find work and that alone can push wages down. (6)

But it’s not just the tech sector, all college grads are feeling the strain as upward pressure on wages for sectors like retail and hospitality is increasing. (7) This has been the case since 2020, after three decades of consistent wage premium growth for college grads has reversed and is now falling.

Although we know that historically, college grads have done better financially than their less-educated counterparts, we also know that marginalized groups, like women, minorities, and first-generation college students struggle to achieve the Financial Freedom of educated white men with generational wealth behind them. (8)

Even now, as women, minorities, and first-generation college students attain more education, they still are not making the same salaries as their white male counterparts. (9) For example, in 2018, a white graduate with a college degree made approximately 21% more per hour than their black counterparts. (10) In the same survey by New America, men with bachelor’s degrees were found to make nearly 25% more annually than their female counterparts. And Pew found that first-generation college graduates make almost 27% less than their contemporaries with parents who had graduated with degrees. (11)

Regardless of how hard they work, many students are still being left behind due to the low-paying work environment they’re finding when they have finally finished their degrees and a lack of connections that can lift them into higher paying jobs and set them on a painless path.

You can help college grads reach Financial Freedom
College grads who are struggling to achieve Financial Freedom despite their efforts fall under two of our five drivers of Financial Freedom: Work and Education.

Some may be tethered to industries where jobs simply aren’t there anymore, or pursued a path that promised to be lucrative and has since been changed permanently by the COVID pandemic; those who aren’t may still be fighting to be recognized for the work they’ve done due to a lack of connections or a lack of specific skills that can help them better present themselves to prospective employers that know nothing about them.

These are problems that we aim to solve through our ImpactFool Fund, by partnering with various innovative organizations that help college graduates find better work and learn to self-advocate for better paying jobs in order to reach their own Financial Freedom.

You can help, too, by donating your time, talent, and treasures to these great organizations. Our goal is to make sure that everyone who has worked hard to attain an education can earn a living that will more than cover the cost of that education and, at the same time, reverse the many knock-on effects of student loan debt across the country.

Footnotes:

1. https://www.fool.com/research/student-loan-debt-statistics/
2. https://www.fool.com/research/student-loan-debt-statistics/
3. https://www.indeed.com/career-advice/pay-salary/average-salary-for-college-graduates
4. https://www.calculator.net/student-loan-calculator.html?cloanamount1=37%2C853&cloanterm1=10&cinterestrate1=6.8&cmonthlypay1=&ctype=1&x=Calculate#general
5. https://www.nar.realtor/research-and-statistics/research-reports/the-impact-of-student-loan-debt
6. https://www.ciodive.com/news/tech-unemployment-june-comptia-indeed/720779/
7. https://www.theatlantic.com/ideas/archive/2023/10/college-degree-economic-mobility-average-lifetime-income/675525/
8. https://www.pewresearch.org/social-trends/2021/05/18/first-generation-college-graduates-lag-behind-their-peers-on-key-economic-outcomes/
9. https://www.pewresearch.org/social-trends/2021/05/18/first-generation-college-graduates-lag-behind-their-peers-on-key-economic-outcomes/
10. https://www.newamerica.org/education-policy/edcentral/college-pays-off/
11. https://www.pewresearch.org/social-trends/2021/05/18/first-generation-college-graduates-lag-behind-their-peers-on-key-economic-outcomes/