Student Debt: The Unlikely Win-Win

Student Debt: The Unlikely Win-Win

Slide1Approximately three-fourths of all students graduating from four-year colleges have student loan debt?that?s $865 billion, approximately $25,000 per graduate. Student loans are now higher than they?ve ever been, and higher than credit card debt. As you might expect, this leaves recent graduates wondering if they?ll ever be able to invest in real estate, a part of the American Dream millennials have always assumed they?d get a piece of.

But monstrous amounts of student loan debt are causing default (which damages credit scores) and making it extremely difficult for young people to qualify for a mortgage. Unfortunately, women and minorities are even more likely to experience financial hardships as a result of student loan debts that don?t match their current saleries. Luckily, as Jason Hartman points out, everybody?s got to live somewhere?student loan debt is simply creating more long term and permanent renters, a great thing for property investors.

As older people are choosing to move into smaller homes or give up home ownership in order to travel, these properties present an opportunity for property managers. Houses that rent as single-family homes can be rented for significantly more to students on a by-the-room basis. Longer-term renters are less work, generally more reliable, and overall, easier to deal with.

And for students and recent graduates, it isn?t so bad either, and it is getting better. Student debt is generally indicative of a higher earning potential in good job markets, and unemployment is at a four year low, meaning that it is becoming a better, asset-building form of debt. Eventually, paid off student loans result in extra income that can be invested in order to begin building wealth.

So, while early investments may not be in the cards for everyone, it isn?t the never-ever situation you may have been led to believe. In fact, assuming a student follows a four-year degree plan and earns scholarships and employment wage, he or she can begin investing relatively early.

To manage student debt and begin a lifelong path to investment, keep in mind these three steps:

1. Pay off high interest debts first
2. Pay as much as you can afford on student loan debts
3. Start planning for investments if your remaining loans have a very low interest rate

By setting and adhering to a sound financial plan, investors and renters alike can benefit and ultimately profit from student loan debt. (photo credit: Our Lady of Disgrace via photopin cc)

* Read more from Young Wealth
Protecting Your Investments with Rental Insurance
Investing in College Towns: Is it Worth It?

The Young Wealth Team