A recent study by UBS reveals that student loan borrowers in the U.S. are younger, more impulsive, and financially less secure compared to the general population. As the federal student loan payments are set to resume after a three-year hiatus, UBS aimed to examine the financial well-being of borrowers in comparison to non-borrowers.
The study found that in addition to the monthly loan payments, student loan borrowers exhibit behaviors that hinder their financial progress. They are more likely to have an impulsive spending mindset, lack emergency savings, and carry credit card debt. On average, they earn less income, skew slightly female, and are younger than the general population.
One key area of concern is impulsive spending, as 62% of student loan borrowers adopt a “live for today” philosophy, compared to 47% of the general population. To address this, financial experts suggest setting personal spending rules and creating an “autopilot” for decision-making, helping to curb impulsive purchases.
Building an emergency fund is another challenge for student loan borrowers. They are less likely to have sufficient savings for unexpected expenses compared to non-borrowers. To address this, borrowers can identify areas in their budget where they can cut back temporarily and gradually increase their emergency savings over time.
Credit card debt is also a burden for student loan borrowers, with higher balances and a lower likelihood of paying off the full amount each month compared to the general adult population. Experts recommend prioritizing debt repayment by focusing on high-interest debt first and allocating any extra funds towards paying off credit card balances.
While managing student debt and credit card debt simultaneously can be challenging, taking small steps to improve financial habits and prioritize debt repayment can lead to long-term financial stability for borrowers.