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Student loan debt weighs heavily on millions of Americans, and many may want to keep the next generation from this same burden. But with competing financial priorities after graduation, it can be difficult to pay down your own debt and save so your children won’t need student loans when they’re ready for college.
According to a new NerdWallet survey, 1 in 5 U.S. parents of children under 18 (20%) say they haven’t yet started saving for their children’s college education, but they want to.
The NerdWallet survey of more than 2,000 U.S. adults — among whom 334 currently have federal student loan debt — conducted online by The Harris Poll asked Americans about their student loan debt and how loan forgiveness and/or forbearance would impact their finances. We also asked parents of children under 18 who have student loan debt how they feel about their kids taking on debt to pay for college.
Most say college is important, but you shouldn’t take out loans for it. The survey found that while more than half of Americans (52%) don’t think most people should take out student loans to pay for college, nearly 3 in 5 Americans (58%) say that four-year college is worth the cost.
Some want to break the cycle of student loan debt in their families. Close to 2 in 5 parents of kids under 18 who have personal student loan debt (37%) want their family’s student loan debt to end with them, according to the survey.
Others may not have kids because of their student loan debt. More than half of Americans in the survey who have personal student loan debt and aren’t parents (54%) say having children is unrealistic for them, at least in part due to their student loan balances.
Student loan forgiveness will be major for most. Over half of Americans with federal student loan debt (53%) say partial student loan forgiveness of $10,000 would have a major impact on their finances; another 3 in 10 (30%) say it would have a moderate impact, the survey found.
“You can see where parents with student debt are coming from: They’ve struggled with student loan debt themselves and they don’t want their kids to bear the burden as well,” says Anna Helhoski, student loans expert for NerdWallet. “But breaking that debt cycle may not be conducive with expecting to pay for college out-of-pocket. Most families can’t.”
Americans value college, but think most should eschew loans
According to the survey, nearly 3 in 5 Americans (58%) say four-year college or university is worth the cost. However, about two-thirds of Americans (65%) say most high school graduates should go to community college or trade school instead of enrolling in a four-year college right after high school. On top of that, more than half of Americans (52%) don’t think most people should take out student loans to pay for college. All this suggests a disconnect between how much we value education and how much we think it should cost.
“Student loans are largely unavoidable for most students, but college still pays off,” says Helhoski. “Bachelor’s degrees lead to higher lifetime earnings, by and large. But your ability to repay your debt will depend on what you study, how much debt you take on and what you end up doing after graduation.”
Some parents want to end generational student loan debt
Student loan debt can make it hard for many to get ahead, but it can also impact some big life decisions and the options the indebted have. The survey found that over half of Americans who have personal student loan debt and aren’t parents (54%) say having children is unrealistic for them, at least in part due to their student loan balances.
For those who have personal student loan debt and are already parents of minor children, close to 2 in 5 (37%) want their family’s student loan debt to end with them. But 1 in 5 indebted parents of children under 18 (20%) say that while they want to save for their children’s college education, they haven’t started saving yet.
A concerning finding from the survey is that nearly 3 in 10 parents of children under 18 who have personal student loan debt (29%) prioritize saving for their children’s education over saving for retirement. While this is an understandable instinct, it’s not the best choice from a financial perspective. Student loans exist as an option, retirement loans don’t.
Most were skeptical of student loan forgiveness, but hopeful
At the time of the survey, nearly two-thirds of Americans (63%) said they didn’t think widespread student loan forgiveness would ever happen. However, the Biden administration has since announced that $10,000 in federal student loan debt will be forgiven for borrowers who meet income thresholds — and as much as $20,000 for borrowers who were also awarded a Pell Grant.
As of June 2022, total federal student loan debt is $1.62 trillion among 43 million Americans. For nearly one-third of borrowers, cancellation of $10,000 in debt will wipe out their balances, but for others, this amount is just a drop in the bucket. Still, our survey shows this partial forgiveness will have an impact.
More than half of Americans with federal student loan debt (53%) say cancellation of $10,000 in student loan debt would have a major impact on their finances, while another 30% say it would have a moderate impact, according to the survey.
“Of course, student loan borrowers are in favor of cancellation because even $10,000 could impact how quickly they repay their loans — if it doesn’t rid them of debt entirely,” says Helhoski. “But for high-balance borrowers, it’s difficult to see the effect $10,000 will have. That amount won’t lower their payments or get them out of debt much quicker, either.”
An extension on automatic forbearance is also a welcome reprieve. Close to half of Americans with federal student loan debt (45%) say continued student loan forbearance would have a major impact on their finances, and about the same proportion (43%) say it would have a moderate impact, the survey found. President Joe Biden has announced a final extension on automatic forbearance, with payments resuming in January 2023.
What parents of college-bound kids can do
Figure out what you can reasonably expect to save for your children’s education. No matter how you feel about student loans, it may not be possible for you to pay for all of your children’s postsecondary education. According to the survey, of parents of children under 18 who have student loan debt, over a quarter (26%) say they expect their children will need to take on student loan debt to pay for college.
But even if you can’t pay 100% of your children’s tuition, that doesn’t mean you can’t make a meaningful impact on their post-college finances by contributing what you can. Maybe you can save up enough to cover half, or a quarter, or even room and board. Whatever is realistic for you, start saving for college as early as you can without jeopardizing your other financial goals.
Have college conversations with your kids early and often. The survey found that more than a third of parents of minor children with student loan debt (35%) say they’ll advise their children to make college decisions to keep costs low, like going to a two-year college instead of a four-year university or choosing an in-state school instead of going out of state. Having these discussions early on can set expectations and allow you to make a plan together before the whirlwind of college applications.
Tell your kids what you’re willing and able to contribute to their education and discuss their options for making up any deficit. Maybe they need to work part-time or apply for scholarships. Or maybe they’ll need to take on student loans. But setting expectations early can allow your children to consider their college choices and what they’ll need to do to pay for them.
Don’t put saving for your children’s education before saving for your retirement. Parents want to do the very best for their children, and some may think this means putting their kids’ college tuition before their own retirement. But ultimately, while student loans are widely available, financial assistance in retirement isn’t. And in putting your kids’ costs first, you may be setting them up to financially support you in retirement.
Retirement should be a top savings priority, even if it means you can’t save anything for your children’s education. Advise your kids to make choices that help limit their student loan burden, but avoid putting yourself in financial peril to cover a tuition bill.
“It’s entirely understandable why parents want to help their kids pay for college and avoid the stressors of debt at a young age, but if that ‘help’ means burdening yourself with debt you can’t afford, it’s a bad idea,” says Helhoski. “What parents can do is be honest with their kids about family finances and what they can afford to take on. That could mean guiding them toward taking a second look at a less-expensive college option if their first is financially out of reach.”
This NerdWallet survey was conducted online by The Harris Poll from July 26-28, 2022. The survey of 2,048 U.S. adults ages 18 and older included 558 who have student loan debt, 334 who have federal student loan debt and 673 who are parents of children under 18. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within + 2.8 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, contact Alikay Wood at [email protected].