Millennials know what they’d do if they didn’t have to pay their student loans: Pay off everything else

Indebted millennials said if they didn't have student-loan debt, they'd use the money to pay off other debt.

caption
Indebted millennials said if they didn’t have student-loan debt, they’d use the money to pay off other debt.
source
GABRIELA BHASKAR/Reuters

Student-loan debt can eat up a big chunk of a paycheck every month.

That’s money that could be spent elsewhere – like paying off other forms of debt. A new survey from Insider and Morning Consult found that 30% of millennials with student-loan debt said that if they weren’t paying off college, they’d use the money to pay down other debt.

The survey polled 2,096 Americans about their financial health, debt, and earnings for a new series, “The State of Our Money.” More than 670 respondents were millennials, defined as ages 23 to 38 in 2019. Nearly 40% of those millennial respondents have undergrad or graduate student-loan debt.

Overall, it looks like millennials are a financially responsible bunch – or at least, they want to be. Nearly three-quarters of those with student-loan debt would make smart money decisions with the money otherwise. Apart from the group who would put the money toward unrelated debt, 20% would save the money, 13% would use it pay off outstanding bills, and 11% would invest it.

Slightly less than 10% each would use the money to travel or make a necessary purchase, and less than the survey’s overall margin of error (2%) would donate the money or use it to shop.

Your monthly student-loan debt payment, reimagined

The average student-loan debt total per person is $31,172, and the average monthly student loan payment for graduates is $393, according to Credit.com.

Meanwhile, the average household credit-card debt in America is $5,700, according to an analysis of US Census Bureau and Federal Reserve data. If one were to put the monthly student-loan payment average toward this sum, they’d be able to pay off the average credit-card debt in just over 14 months.

Now, let’s look at how that $393 – that’s just one typical monthly payment – would fare if one invested it at age 22, when most graduate college, and left it there until age 65, the standard retirement age. The compound interest formula is:

Future Value = Present Value * (1+Yield)N

The Present Value is the amount of money you start with – $393. The Yield is the interest rate, or rate of return you get per year – let’s put this at a typical return rate of 6%. N is the the number of years your money compounds – 43, in this case. So, our new formula is:

Future Value = 393 * (1.06)43

The investment of $393 becomes $4,814 after 43 years; that’s 12 times your starting money. Imagine just how much that would grow if you were able to turn that monthly student-loan payment of $393 into a monthly investment payment.