Nearly a third (31%) of Americans with student debt say they opted not to make payments on their loans during the national forbearance, using the reprieve to pay down credit card debt, save up for discretionary spending and build up their emergency savings, according to new research by Empower.

Credit Cards

To afford their student loan payments, 32% of Americans say they plan to take on more credit card debt. They also plan to cut back on discretionary spending (59%), dining out (59%), and almost a third (31%) of those surveyed are considering trading in their car and will say bon voyage to upcoming trips and vacations (41%). To increase savings, 52% of Americans are considering switching to a higher-paying job and 48% are planning on taking on a side hustle, according to the news release.

Almost 1 in 4 adults with student loans (18%) wish they invested the money to grow it in the market instead of taking on debt and had done more research before signing the note (23%). Higher education remains paramount to respondents with just 14% saying they wouldn’t go to college if they could do it all over again.

Additional Key Findings

  • Roommate wanted: Gen Zers (49%) and Millennials (38%) are considering moving in with roommates to afford their monthly payments, and 39% of Gen Zers with student debt say they may move back in with their parents.
  • Moving, and still renting: Moving to a lower-cost area is on the minds of Americans with student loan debt, with 46% of Millennials and 47% of Gen Z saying they may relocate to a more affordable area, compared to 39% of the student loan population as a whole. But they won’t become homeowners in the process – some half of Americans with student debt (46%) may delay buying a home once payments resume, including 52% of Millennials, 45% of Gen Z, and 39% of Gen X.
  • Relying on credit cards: Over half of Gen Z and Millennials who have student debt (51% each) say they were able to pay down $100 of credit card debt each month during the pause, close to one-third (31% of Gen Z and 38% of Millennials) say they will likely take on more credit card debt once the forbearance ends.

Options are available that may make repaying student loans less of a burden, according to Vance Rusley, CFP®.

The full report can be found here

*About the Study
Empower engaged Morning Consult to survey 2,210 adults. The poll was conducted online June 28-30,2023 and the data was weighted to approximate a target sample of adults based on gender, age, race, educational attainment, and region. Results from the full survey have a margin of error of plus or minus 2 percentage points.

1 The Empower Personal Cash™ Annual Percentage Yield (APY) as of 5/10/23 is 4.45% APY (4.362% interest rate). The calculation for APY is rounded to the nearest basis point. Both the interest rate and APY are variable and subject to change at UMB’s discretion at any time without notice.

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2 As of Jan. 31, 2023. Assets under Administration (AUA) refers to the assets administered by Empower under service contracts, including recordkeeping, for retirement plans and participants, IRAs, and other pension accounts. On Aug. 1, 2022, Empower announced that it is changing the names of various companies within its corporate group to align the names with the Empower brand. 

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes the use of by individuals who complete CFP Board’s initial and ongoing certification requirements.

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Source: Empower