Financial Freedom Without Student Debt
Households have higher net worth when they don’t have outstanding student debt, according to data published by the Pew Research Institute. The study compared income and net worth of households headed by a person college-educated age 40 or younger. The study revealed the average household income was the same for those headed by persons with and without student debt. However, the average net worth for households without student debt is $64,700. Whereas, households headed by a person with student debt averaged lower net worth of $8,700.
This data confirms what all financial planners already know – that you must pay off your debt to get ahead in the financial game. Many graduates make the minimum student loan repayments when they start their first jobs. But, people who double down and pay more than the minimum get their debt paid off much faster. These are the same people who save up for a down payment on their house and pay off their credit cards monthly. The freed up cash flow from student loan and other debt payments go towards future spending goals such as retirement and college. The result is that these people have more options because they are financially secure and have the freedom that does not come when crippled with debt.