Living with credit, Research, regulation, industry reports

Student loan holders aren’t all drowning in credit misfortunes

Sienna Kossman

Despite the barrage of headlines about the student loan problem, there is good news: Student loans aren’t crippling young adults’ financial abilities and credit activity as many believe.

Even though nearly 52 percent of young adults are taking on student loan debt and the national student loan debt balance has surpassed $1.3 trillion?


Student loan holders aren't all drowning in credit misfortunes

Despite rising student loan balances, a May 2015 TransUnion study found that student loans have not seriously hindered young adults’ ability to access and repay other types of consumer credit, such as cards, auto loans and mortgages.

In fact, 18- to 29-year-olds perform just as well, if not better, on those credit products while repaying their loans when compared to similar-aged peers who don’t have student loan debt. The study found when student loan holders first enter repayment, they engage in credit activities less than their loan-less peers, but after two solid years of repayment, student loan holders become more active users of credit cards, auto loans and mortgages. Plus, those with student loan generally have lower delinquency rates on new accounts.

Additionally, TransUnion found the impact student loans have on consumer credit profiles and other loan participation rates remained similar to trends observed before the 2008 recession hit, indicating that even though the national student loan debt total has increased dramatically in recent years — up from $589 billion in 2005, according to TransUnion — the way young adults engage with credit hasn’t been greatly affected by higher student loan debt loads.

That kind of contradicts the student loan doom and gloom you typically hear about, huh?

If you’re surprised, I don’t blame you. Even if you don’t have student loans, you’ve probably heard at least some of the ongoing, negative chatter about the student debt balloon from media, policymakers and even young loan holders themselves — myself included.

However, the TransUnion study shows a positive side of student loan debt that I believe gets overshadowed by negative news too often: Student loans help you transition into a financially conscious adult, even though monthly payments can leave you broke and crossing your fingers for a big lottery ticket win.

I view my student loan debt — $24,305.58 as of May 25 after almost 10 months of repayment — as a worthy investment that has taught me many financial lessons. Without student loans, I wouldn’t have gotten the education and professional experience needed to secure the job I have now, which helps me stay ahead on my student loan payments and engage in other credit-related activities.

Yes, adjusting my budget to accommodate monthly student loan payments was annoying, and the tight budget has prevented me from getting a dog and buying lattes every day of the week, but being responsible for the loans has taught me a lot about managing money and prepared me for both buying a car and responsibly handling credit cards.

There’s nothing like the reality check of seeing just how much of your loans the diligent monthly payments DIDN’T pay off because of interest to make you want to increase your payments and decrease repayment time.

Based on my student loan repayment experience so far, I wasn’t surprised that TransUnion data found student loan holders typically have lower delinquency rates on other credit accounts than those without student loans. If a young adult doesn’t have student loans but delays big life milestones — such as buying a car and a house, as many millennials are — he or she may miss early learning opportunities. Without managing loan repayment shortly after entering adulthood, credit lessons that could’ve been learned right after college may be delayed and as a result affect how he or she handles his or her first major credit account later.

I know I wasn’t a perfect when I started out, but I’ve since come a long way and credit much of my growth to student loan management. Learning how to handle credit — and loan repayment — doesn’t happen overnight and becoming a financially established adult takes time, no matter how much or how little student loan debt you hold.

Still think millennials are dragging their feet when it comes to credit? Well, I think the fact that TransUnion found positive credit activity among student loan holders is a sign that things will improve — just not right away. More than half of us are managing student loan debt and can still handle other loan accounts, according to the study findings, which is really good news. And, assuming the studied trends hold, the longer millennials are in repayment, the more engaged in credit they will become. Even those who don’t have loans aren’t that far behind.

We’ll all get there, some sooner, some later.

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, we ask that you do not disclose confidential or personal information such as your bank account numbers, social security numbers, etc. Keep in mind that anything you post may be disclosed, published, transmitted or reused.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.