How Student Loans Are Killing the Middle-Class Dream

Katie Taylor Updated on May 13, 2019

My parents purchased their first home when my mom was 28—a small, brick ranch with a sunken den where I watched "Little House on the Prairie" and snuggled with my baby sister. By the time I was eight years old, we'd upgraded to a split level on a quiet cul-de-sac. My mom was 31. My dad was 36.

According to the American Dream—that ubiquitous mantra that says we should all be doing better than our parents—I should've bought a bigger and fancier home than my parents' first house when I was in my mid-twenties. Instead, I didn't buy my first home until I was 33. And that was only possible because I married someone without debt. 

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 The truth is, most of us aren't surpassing our parents. In fact, we often feel like we're lagging behind. So what's holding us back?

Student loans or a down payment?

A recent article in the New York Times sets it out pretty clearly. National student loan debt has risen from $241 million in 2003 to approximately $1.4 billion in 2018. It doesn't take a college education to realize that an increase like that will have a serious impact on the financial futures of individual borrowers—and on the population as a whole. 

So what does the American Dream look like for student loan borrowers? 

Rebecca Wills is one of the people profiled in the Times article. She is 28, has paid $30,000 in student loan payments since she graduated, and can't image how she and her fiancé might ever have enough to buy a home.

Adrienne Naylor is 34, has almost $300,000 in student loan debt, and lives in a 2-bedroom apartment with two college students in Cambridge, Massachusetts. At a home-buying seminar, she learned that the average price of a condo in her area is $800,000. 

Matthew McCabe is 40 and still owes over $80,000 on his student loans. The loan forgiveness he was relying on didn't pan out, and he can't envision ever affording a home on his educator's salary. 

According to data from the Federal Reserve Bank of New York, student debt is a significant reason for the drop in homeownership among those 28-30 years old. If you graduated with student debt, you're less likely to own a home by the time you're 33 than your debt-free colleagues. 

The financial crisis

We can't completely single out student loans, though. The financial crisis also has a role to play. Many parents who imagined they'd be able to help with the costs of education—or a house down payment—were instead laid off, finding themselves without the discretionary income to provide assistance.  

Graduates faced a job market with fewer open positions and lower salaries. Borrowers with PhDs took jobs as waiters and house cleaners while they searched for positions that would allow them to use their education and make a little more cash.

Some of them were able to keep up loan payments while being underemployed. Others were not able to stay current on their loans, adding penalties and unchecked interest to their already burdensome loan balances. 

See also: 3 Reasons Millennials Got Shortchanged with Student Loans

So going to college (and perhaps graduate school)—those choices that you believed meant you'd be well prepared for the adult life you saw your parents enjoy—may have instead left you chasing a dream that seems completely out of reach.

Rent versus buy? The question is moot for many people in our generation. If you can hardly manage your monthly bills, forget about ever saving enough to make a down payment on a home. 

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Steps you can take 

After reading that bleak picture, we could all use a little time curled up on the couch nursing our dashed hopes.

Take a breather. Grab a pint of ice cream and grieve the loss of that image of your future—the one where you bought a cute little house with a picket fence when you were 25 and a vacation cabin on the lake by the time you were 40.

You can't solve the student loan crisis, and you can't make your student loans disappear. But there are things you can do to help claim your piece of the American Dream. 

1. Refinance your student loans. The average borrower who refinances lowers their payments by $253 a month or $16,183 over the life of the loan

2. Pay your loans off faster. Definitely easier said than done, but you can take inspiration from people who've done it

3. Apply to win a scholarship towards your student loans. 

4. Change your payment schedule. Making biweekly instead of monthly payments can help you pay your loans off in less time without impacting your day-to-day budget. 

5. Ask for a raise. You might be surprised when you get it. Then put that extra money straight toward your student loan payments. 

Whether homeownership is in your plans or not, taking positive action to reduce your debt will help you secure a stronger financial future. Finding out how to save on your student loans is a great place to start. 

About the Author
Katie Taylor

Katie Taylor is a content writer and editor with expertise in law and policy, finance, and entrepreneurship. She writes for startups and small businesses about everything from bookkeeping to telecom. Her work has been featured in The Washington Post and She is continuing to pay off law school loans and lives in Richmond, Vermont with her wife, son, and an unruly dog. Read more by Katie Taylor

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Splash Financial is a leader in student loan refinancing with new rates as low as 3.25% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

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Earnest empowers people with the financial capital they need to live better lives.

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Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

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Operates in all 50 states; 2nd largest student loan refinancing lender

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Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.

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Credible is an online marketplace that provides borrowers with competitive, personalized loan offers from multiple, vetted lenders in real time.

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Credible is a multi-lender marketplace that empowers consumers to discover student loan refinancing options that are the best fit for their unique circumstances. Our integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options ― without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 2,000 positive Trustpilot reviews and a TrustScore of 9.5/10. Credible is headquartered in San Francisco, California.

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For every loan they fund, they contribute to the education of a child in need

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CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

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Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

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Many ELFI customers save hundreds per month month and thousands over the length of the loan term.

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Education Loan Finance is designed to assist borrowers through consolidating outstanding education loans into one single loan that effectively lowers your costs of education and/or makes repayment very simple. Education Loan Finance - backed by the strength of SouthEast Bank - combines the benefits of traditional education loan refinancing with the superior products, service, and support found in the private market.

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I reduced my student loan payment by $152 per month, by refinancing thru Nitro:

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