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Student debt weighing on young Americans' net worth

Published: Sunday, June 15, 2014 12:00 a.m. CDT • Updated: Sunday, June 15, 2014 8:42 a.m. CDT
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(Sarah Nader- snader@shawmedia.com)
Jill Weidner, Sage YMCA fitness, wellness and sports director, makes a phone call while working in Crystal Lake Tuesday, June 10, 2014. Weidner has paid off nearly $26,000 on her student loans since graduating Northern Illinois in 2011. She has held off on other purchases, like a new car and house, while also living with her parent at their him in Marengo. She has $10,000 remaining on her student loans, as she tries to save for a wedding and a down payment for a house.

Responsible for paying her way through college, Jill Weidner lately has fallen behind on paying down $36,000 in student loans – a top priority for her since graduating from Northern Illinois University in 2011.

Weidner already moved back home with her parents in Marengo, delayed a new car purchase, avoided pricey vacations and found a full-time job upon graduation to pay down a sizable chunk of her student debt.

Young Student Debtors Lag Behind in Wealth Accumulation

With $10,000 left to be paid, Weidner's financial juggling act has been complicated lately by her own wedding plans and saving for a down payment on a house. The newly-hired fitness, wellness and sports director at Sage YMCA said she would like to save more, but she realizes her obligations.

"Financial stability is about decision-making," Weidner said. "It's not about how much you make or how much you owe. It's about the decisions you make with the money that you have."

Student debt, coupled with other financial decisions, are increasingly weighing on the economic fortunes of young adult Americans. A recent Pew Research analysis found that young, college-educated households without any student debt have seven times the typical net worth than the same households with student debt.

The Pew report also found that households headed by an adult under 40 with student loan obligations has on average $137,000 in overall debt, which includes credit cards, mortgages and car loans. The overall debt load is roughly twice as much than similar households with no student debt, the Pew report found.

The national analysis comes when student loan debt in the United States has exceeded $1 trillion and caused concern about its effects on the middle class.

As part of a midterm election strategy built around those individuals, President Barack Obama on Monday signed an executive order that allowed five million Americans to cap their student loan payments at 10 percent of their income.

U.S. Senate Republicans followed Obama's executive action later in the week by blocking legislation that would have allowed people to refinance their student loans at lower interest rates. With the national debate on student debt unresolved, students locally sometimes don't fully understand the repayment options available to them, said Maria Tech, a financial aid and loan specialist at McHenry County College.

Students have a tendency to rush through counseling sessions and overlook options available to them to consolidate loans and even defer loans under certain circumstances.

Students also need to watch their debt loads and question how much they need to borrow, said Marianne Devenny, dean of enrollment services at MCC.

"They should know what their debts are before they take on debt," Devenny said. "You should always be aware of your financial situation."

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