How Not Having Student Loans Affects Your Financial Future
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Here's your Money Briefing for Thursday, December 1st. I'm J.R. Whelan for The Wall Street Journal. The pause on federal student loan repayments has been extended until June, but there are no guarantees loans will be wiped away as litigation against President Biden's forgiveness plan makes its way through the courts. And while those loans can fund a degree that could lead to financial success, the burden of those loans can make that road long and steep.
Graduating without debt doesn't guarantee that you're going to be wealthy. But when debt is taken out of the equation, it opens up certain pathways that are otherwise harder to access.
On today's show, we'll discuss the impact of taking out student loans and not having to take out loans on people's personal finances with our reporter Joe Pinsker. Plus, we'll chat with a 30-year-old Colorado resident about how not having to take out loans helped him achieve financial success. That's after the break.
This podcast is brought to you by ReliaQuest. Cyber criminals are constantly attacking. They want your data. They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com.
How does the episode introduce the issue of student loan pauses and their uncertainty?
Taking out and having to repay student loans can be a drag on your personal finances. And that burden can be measured against the people who didn't take out college loans. But is not having student debt an automatic key to financial success? In a moment, we'll hear directly from someone who didn't take out loans about what it's meant for them. But first, let's bring in WSJ personal finance reporter Joe Pinsker. He's written about this topic and he joins us now. Joe, thanks for being here.
Yeah, thanks for having me.
So first of all, Joe, what kind of a difference does it make in terms of the financial burden people face who have taken out student loans versus those who haven't?
So graduating from college and owing money is going to be a burden. Graduating from college and not owing money is going to free people up in certain ways. Obviously, that in and of itself doesn't guarantee that somebody is going to build wealth. But many people say that not having debt frees them up to do many things like buy a home sooner or start a business. Research from the Federal Reserve actually shows that the rising amount of student debt has impacted young Americans' ability to own homes. And similar research from the Philadelphia Fed has found that people who hold debt are less likely to start a small business. So some of the ways that you think about building wealth if you're a young person become harder to access when you have debt to pay off each month.
So the Fed does a survey where it asks Americans about their financial situations. And among Americans with a bachelor's degree, 64% of the people who didn't take out student loans said that their financial status was, quote, living comfortably. But if you look at the group of bachelor's degree holders who currently hold debt, that percentage was only 36%.
But Joe, just to be clear, some people just can't avoid taking out student loans.
Right. On some level, it's a choice to the extent that students can pick between colleges and maybe choose an in-state tuition over something more expensive.
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