Report Details Lifetime Impact of Student Loan Debt

A new research report on student loan debt is pinpointing the lasting financial effects.

Lost lifetime wealth, according to the report from Demos - a national, nonpartisan public policy group - will reduce two-thirds of retirement savings by $134,000 with the remaining third being lost from lower accumulations in home equity. Demos attributes these wealth losses to loan repayments and the amount of time needed to fully repay them.

Thirty-nine million Americans have used student loans to fund college education. An education debt of $53,000 translates to a $208,000 lifetime loss of wealth, according to the report. If current student borrowing trends continue, student debt will reach $2 trillion by 2025. A $1 trillion in outstanding student debt will lead to a total lifetime loss of $4 trillion for affected households.

“Though a college education remains the surest path to a middle-class life, evidence has begun to mount that student debt may be far more detrimental to financial futures than once thought, particularly for those with the highest levels of debt: students of color and students from low-income families,” states the report titled, At What Cost: How Student Debt Reduces Lifetime Wealth.

The report further warns of the risks that spiraling student loan debt has on the nation’s economy.

“Student debt’s financial impact won’t just be felt by the nearly 39 million Americans who currently have student loans. The drag of student loans on indebted households’ purchasing power and ability to save will slow an already-sluggish growth for the entire U.S. economy,” the report stated. “If we wish to avoid this fate, we need to take immediate action to both reduce the burden of existing student debt and prevent future debt from piling up even higher.”