How Student Loan Debt Is Affecting the New American Dream

When you think of the American Dream, what do you think about? In previous generations, it was a desire to get an education, a good middle-class job, own a home, and start a family.

Although this American Dream still persists, there’s a revamped version of the American Dream that people are pursuing amid the pandemic.

We’ve all, in a way, been confronted with our own mortality and realize just how short life is. People are craving experiences — they want to work remote jobs instead of going back into the office, and they want to operate on their own terms. But many people feel the weight of student loan debt holding them back from both the Old and New American Dream.

Read on to learn about the New American Dream and strategies to manage and repay student debt so you can pursue your dream, whatever it means for you.

The New American Dream

We’ve all grown up with our own version of the American Dream. But the New American Dream has shifted from a priority of security and stability to a focus on purpose and experiences.

A Fast Company article explains, “The new American Dream is to live large in the moment, be comfortable, do things we are passionate about away from the confines of a desk and an office—and to let everyone else know about it.”

The New American Dream is about taking charge of your life and doing what you want. People got a taste of remote work and don’t want to go back to their cubicles. According to a survey from Harvard Business School Online, 81% of survey respondents don’t want to go back to the office or would prefer a hybrid schedule.

They want to have some level of autonomy, which we’ve also seen with the rise of digital nomads and professionals working for themselves. There’s been a huge workplace shift that might look different for generations going forward.

A survey by freelancing platform Upwork found that in 2020 59 million Americans — or 36% of the workforce — are now freelancing. On top of that, 58% of traditional workers who started working remotely during COVID-19 are thinking about freelancing.

Work trends are shifting and people don’t want to be stuck at a desk or an office being micromanaged when they can have more independence.

Owning a home is still a top priority

The New American Dream still prioritizes homeownership, as we’ve seen this past year with rising homeownership rates. Between May 2020 to May 2021, single-family home sales increased 39.2%, according to data from the National Association of Realtors (NAR). If you’re interested in selling your house as a student loan borrower, now’s a good time.

Competitive mortgage rates, high demand for a home in a pandemic that has kept us largely inside, and low supply have all contributed to this meteoric rise in homeownership.

Rising home prices

Due to the boost in demand, home prices also significantly increased. According to data from S&P CoreLogic Case-Shiller index, analyzed by Bloomberg, home prices had their highest spike in 30 years this past April.

Although homeownership is part of both versions of the American Dream, the level of access to this milestone hasn’t been the same for everyone.

Zillow reports that, as of May 2021, the median home price was $350,300 — a 23.6% increase from the year before. For example, as of writing, one Zillow listing in Burbank, California for a two-bedroom, two-bath home went from a price of $619,500 to $739,000.

Inequity hinders access to homeownership

When it comes to homeownership, access isn’t created equal for everyone. There’s a history of discrimination and policy allowing some people access, while excluding others.

Consider redlining, which NPR describes as “… the FHA was subsidizing builders who were mass-producing entire subdivisions for whites — with the requirement that none of the homes be sold to African-Americans.”

This type of racist policy has hurt Black Wealth. For example, data from The Brookings Institution found that in 2016, the average Black family had a net worth of $17,150, while the average white family had a net worth of $171,000 — a sum that’s nearly 10-times greater.

Working toward the dream of homeownership

New American Funding, a mortgage lender that specializes in California Home loans, is hoping to make the homeownership process more equitable. New American Funding is working to change the home-buying process with its “New American Dream initiative”. The initiative strives to increase Black homeownership rates and provide access, education, and resources to Black communities.

It’s clear that homeownership is still important in the New American Dream, perhaps as a way to build generational wealth and live out their purpose.

If you’re saving for a down payment, consider investing your money in the short term. There are also Freddie Mac and Fannie Mae homeowner programs that can help. However, as home prices rise, hopeful first-time homeowners might feel priced out, especially on top of other financial obligations, like student debt.

Student loan debt feels like a dream killer

The beautiful thing about the American Dream is it can be personalized and tailored to your specific goals and needs. As we’ve seen with this shift in desires, people have different visions of what their dream looks like. Whether it’s selling your house and buying a van to live in, like our PR manager did, or quitting your job and living abroad — it’s all valid.

But for the nearly 43 million student loan borrowers in the U.S., it can feel tough, especially with the average student loan debt per borrower at $36,520. Student loan debt feels like a dream killer that holds you back from your goals. But you might have more options than you realize.

Managing student debt while pursuing the New American Dream

At Student Loan Planner, we believe in living the life you want while also paying down student debt. It doesn’t have to be one or the other.

For instance, federal student loan borrowers can take advantage of income-driven repayment plans. These repayment plans cut your monthly payment down to 10% to 20% of your discretionary income, with the option for forgiveness after 20 to 25 years.

If you work in the public sector for a decade, you could get Public Service Loan Forgiveness (PSLF) and pay no taxes on the forgiven amount.

To make student loan repayment more affordable, you can also look into refinancing. Student loan refinancing cuts your interest rate by taking out a new loan with a refinancing lender at a more competitive rate. This could save you money on interest and also help you change your repayment terms to make them more manageable for your situation.

Don’t let debt hold you back

Many people think that student debt is the main problem when it comes to the American Dream, but it’s more about the housing market. Rising home prices are pushing people away from homeownership, making whichever American Dream version they ascribe to feel further out of reach.

Regardless of whether you dream of being a homeowner or have a different life goal in mind, student loans don’t have to hold you back.

Of course, pursuing your version of the American Dream is easier when you have the privilege of a paid education or family support. But taking advantage of student loan programs to make payments more affordable can free up money to pursue your dreams.

If you need help with a custom student loan plan to make it happen, get in touch with us for a consult.