Do Student Loan Borrowers Miss Out on Investment Wealth?

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After a three-year break from paying student loans, borrowers are set to begin repaying in October. The good news is that the Biden administration has instituted a 12-month period that allows borrowers to miss or make late payments on their loans without being considered delinquent or getting reported to credit agencies.

The bad news is interest on student loans already began accruing in September and will continue to accrue regardless of the Biden administration’s ramp-up period. This means borrowers will once again have to put money toward loans, rather than investing in their future.

Below are a few financial opportunities borrowers may miss out on in the next 10 years because of their student obligation.

Also see how millennials can invest while managing student loans.

Average Loan

According to the Education Data Initiative, the average student loan payment is $503 per month. The standard time for a repayment plan is 10 years. Over that time, you likely will accrue $13,500 in interest (at a rate of 6%) and pay a total of $63,600 in loan payments.


Sixty-two percent of student loan borrowers live for the moment, buying what they need now rather than investing in the future. This isn’t surprising considering a whopping 56% of borrowers in a Credit Karma survey said they’ll have to choose between making loan payments and buying necessities. Strapped with these types of hard decisions means investing is a no-go. 

Save for Your Future

That said, if you were able to take that $503 per month and invest it with a 7% rate of return, an initial investment of $503 and a 3% adjustment for inflation, you’d make $73,341 over the next 10 years.

Buying a House

Not being able to invest in your future doesn’t just mean forgoing stocks and IRAs, it also can mean forgoing your dream of buying a house.

According to Zillow, the median house price in 2033 (with a yearly growth rate of 1.7%) will be $395,220. Most people try to put down 20% for a house, which means you would need around $79,000. Coincidentally, this is close to the amount you would’ve made in investments had you not had to pay a student loan.

Establishing an Emergency Fund

In order to be prepared for life’s unexpected twists, experts suggest you have three to six months of living expenses tucked away in a separate bank account. If you’re 35 to 44 years old, this amount should total $19,928 to $39,856. That may be impossible to accrue if you’re paying a monthly student loan rate.

How far behind will your student debt put you when it comes to creating an emergency fund? If you were to take the $503 monthly loan payment and instead put it in a savings account with the average 0.42% interest rate, you would saved $60,360 plus $1,393 in interest over the next 10 years. If you started saving at 35 years old, that would put you well above the $20,964 to $41,927 someone in their mid-40s should have saved.

Save for Your Future

Retirement Fund

Student loan debt also will cut into the amount of money you can save for retirement. By age 40, experts say, you should have around $212,000 saved for retirement (three times the average U.S. income of $70,784). If you were to take the $503 per month you pay in student loan payments and put it in a 401(k) with a 7% interest rate, over 10 years you’d save $60,360 plus around $23,238 in interest for a total of $83,598. That’s a little over one-third the amount of money you need to save by age 40.

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