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Is Debt Driving Recent Graduates to Move Back in With Mom and Dad?
The growing total student loan debt in the United States has many experts worried about the future of both higher education and millennials entering the work force. In 2016, more 18-34 year olds moved back home than ever before and the total student loan debt market crossed the $1.4 trillion mark. To combat this, many students have moved home after college to cut costs and get a head start on loan repayments, but is it the best decision long-term?
The obvious reason many millennials are moving home is to save money. Recent graduates with jobs near city centers will likely find it cheaper to live with their parents in the suburbs than to try find a place to rent close to their job. Rising rents and stagnant wages are likely to blame. Although 2016 saw the best job market for college graduates in recent memory, many graduates still find it difficult to cover all of their expenses with an entry-level wage.
Parents Welcome the Change
For years, there was a stigma attached to moving back home with your parents. Students who did were seen as irresponsible or unable to make their own way. Nowadays, many parents welcome their children back home. Seen as a fiscally responsible move by some, graduates who spend a few years at home try to put more money towards their first home, marriage, or a larger move in a few years.
Student Loan Debt
One of the largest drivers of graduates moving back home with their parents is rising student loan debts. After college, many graduates are immediately on the hook to start the repayment of their federal student loans. While some loan programs offer deferment, graduates who are unable to find a job immediately after completing a degree program may find themselves moving back home to reduce their expenses and to start paying back their loans.
Is Moving Back Home a Smart Choice?
One study shows that student loan debt is not a reason to move back in with mom and dad. The federal student loan program in the US anticipates a 10-year repayment program for loans issued to students pursuing a bachelor’s degree. In reality, repayment times are often closer to an average of 21 years. As a parent, it may seem novel to have your millennial move back in with you to help them start the repayment process, but you may actually be preventing them from pursuing better job opportunities or post-baccalaureate programs by having them live at home.
Although the shock of moving out for the first time can be a harsh reality check for many recent graduates, the likelihood that student loan amounts will be paid-down shortly after graduation are low. Instead, recent graduates should explore their career options rather than stay at home to try and repay all of their remaining debt.
Many parents choose to live in the suburbs because of lower housing costs, better school choices, and more space to raise a family. While these were advantageous decades ago, recent trends have shown families moving closer to the city where job opportunities and cultural experiences flourish. As millennials make the decision of whether or not to move back home, they may only be delaying the inevitable jump into the real world and the longer they wait could have long-term consequences.