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Student loans take a mental toll on young people

  • Most working professionals with student loan debt say it's a source of "significant" or "very significant" stress, according to a new report.
  • The majority of young adults say their student loan tab caused headaches or loss of sleep, another study finds.

For many recent graduates, student loan debt is literally giving them nightmares.

Over the last decade, college-loan balances in the United States have jumped to an all-time high of $1.4 trillion, according to a recent report by Experian. The average outstanding balance is $34,144, up 62 percent over the last 10 years.

Those student loan payments have created an "unprecedented financial challenge" for borrowers, according to a new report by Gradifi, a Boston-based start-up that provides a student loan benefit platform for employers.

To that point, 80 percent of working professionals with student loan debt said it is a source of "significant" or "very significant" stress, according to the survey of more than 3,000 Americans conducted online in May.

Many millennials said that student loans have impacted their ability to go on vacation, buy a car, pay rent or get necessities like food and clothing.

And then there are the long-term consequences: From buying a home to getting married and even having children, an increasing number of young adults are putting off major milestones because of that one large liability.

"People with student loan debt are carrying a serious financial and emotional burden," said Tim DeMello, Gradifi's founder and CEO. "The pressure of making big monthly loan payments is taking its toll in terms of stress, housing affordability and quality of life."

For a graduate with a bachelor's degree, the typical loan payment is about $265 a month, Gradifi said, although it can be much higher.

"You have some students with $400, $600, $800 or even $1,200 a month in student loan payments," DeMello said.

According to a separate report by Student Loan Hero, more than 60 percent of those surveyed said they fear their student loan debt worries are spiraling out of control — and even more reported suffering from headaches or lack of sleep from the sheer stress of it.

Ninety percent of workers with student loans said they would like to work for a company that provides a student loan repayment benefit, Gradifi also found. Still, few firms are offering student loan repayment assistance.

For a borrower with a loan balance of $26,500, for example, a $100 per month employer contribution for a loan at 4 percent over 10 years would save more than $10,000 and pay off the balance three years faster. "The impact is pretty significant," DeMello said.

Aetna, Fidelity, PwC and Penguin Random House are a few of the companies that rolled out programs to contribute to employees' loan payments. More are expected to follow.

More from College Game Plan:
Student loan balances hit record $1.4 trillion
The first steps to repaying your student debt

Three ways to avoid the financial death spiral of defaulting on your student loans

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