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With Student Debt, Even Paying It Off Isn’t the End


About two-thirds of the 20 million people who attend college every year borrow money to do so. We’ve heard a lot about how growing educational debt loads — the average student borrower now graduates owing $26,600 — can be a detriment to someone just starting out in life, and to the health of the broader American economy. Student debt loads are crowding out other things that young people historically spend money on, forcing them to delay marriage, home ownership, auto and other big-ticket purchases, investments in start-up businesses, and retirement savings.

But as it turns out, the negative effects of borrowing for college haunt borrowers long after their debts are paid off. 


But a new study from nonprofit group Demos uncovers a troubling phenomenon: All other things being equal, people who borrow money to go to college build about $208,000 less in wealth over the course of a lifetime than those who don’t — and this assumes the borrowers take advantage of the government’s often-overlooked income-based repayment plan.

The Demos report assumes a two-headed household, collectively carrying $53,200 in student loan debt. Servicing that debt chews up 7.5% of their income during the life of the loan, siphoning funds from savings and investment opportunities. These borrowers are more limited in their ability to build home equity and retirement savings as quickly as their debt-free counterparts.

Read the full reportAt What Cost? How Student Debt Reduces Lifetime Wealth