Borrow and Buy Now Rules the Day
America needs financial literacy in paying for college.
Robin Capehart
Mar 17
Over the last several decades, there has been a noticeable cultural shift in how families approach financing higher education. Where saving for college was once a widely practiced and expected financial priority, today, many families rely heavily on borrowing, specifically through student loans, to cover the costs.
This shift reflects broader changes in societal attitudes toward saving and borrowing, as well as a prioritization of immediate gratification over long-term planning. While rising college costs and stagnant wages are often cited as barriers to saving, the root of the issue may lie in a cultural change in financial habits and priorities.
Access to Credit: The Normalization of Borrowing
One of the most significant contributors to the shift away from saving is the greater accessibility of credit. Decades ago, financing major expenses like homes or education required substantial upfront savings.
For example, prior to the 1980s, homebuyers were often required to put down 20-25% of the purchase price, which necessitated years of financial discipline. Today, however, programs such as FHA loans allow buyers to put down as little as 3.5%, making it easier for individuals to purchase homes without significant savings (Urban Institute, 2018).
This same trend has impacted education. Federal student loans became more widely available in the 1970s and 1980s, and borrowing for college has since become the norm.
According to the Federal Reserve, as of 2023, student loan debt in the United States has reached $1.77 trillion, with 43.5 million borrowers carrying student loans (Federal Reserve, 2023). The accessibility of loans has reduced the perceived need to save for college, encouraging families to rely on borrowing instead.
The “Live for Today” Mentality
Another factor in the decline of saving is a cultural shift toward prioritizing immediate gratification over long-term planning. Consumer spending has risen significantly over the past few decades, with Americans increasingly spending on discretionary items such as vehicles, vacations, and electronics.
For example, as of 2022, the average car loan for a new vehicle was $41,665, with a monthly payment of $716 (Experian, 2022). For some families, these types of expenditures take precedence over saving for future goals, such as college tuition.
This “buy now, pay later” mindset is reinforced by a consumer culture that emphasizes lifestyle and status symbols. Social media platforms, in particular, have amplified the pressure to spend on visible markers of success rather than investing in less tangible, long-term goals like education.
Financial Norms: Then vs. Now
The shift in saving habits also reflects broader changes in generational financial norms. For much of the 20th century, saving for college was seen as a shared family responsibility. Parents were expected to contribute significantly to their children’s education, and students often worked part-time jobs to help cover costs. However, this norm has diminished over time.
Today, many families assume that students will rely on loans to fund their education. Sallie Mae’s 2023 “How America Pays for College” report found that 41% of college costs are now covered by borrowing, while only 13% are funded through dedicated college savings accounts, such as 529 plans (Sallie Mae, 2023). This data underscores the diminished role of saving in modern education financing.
Declining Financial Literacy
A lack of financial literacy may also contribute to the decline in saving. Many Americans struggle to understand the basics of personal finance, including the benefits of compound interest and the importance of long-term planning.
For example, a 2022 survey by the FINRA Investor Education Foundation found that only 34% of respondents could correctly answer four out of five basic financial literacy questions, a significant decline from 42% in 2009 (FINRA, 2022).
This lack of knowledge can lead to poor financial decision-making, such as underestimating the amount needed to save for college or failing to take advantage of tax-advantaged savings vehicles like 529 plans. Without a strong foundation in financial literacy, many families are ill-prepared to prioritize saving for education.
The Borrow and Buy Mentality
The broader trend toward borrowing instead of saving is not limited to education. According to data from the Federal Reserve, the average American household carries $6,473 in credit card debt, and 60% of families report having less than $1,000 in savings (Federal Reserve, 2023). This reliance on borrowing is indicative of a cultural shift where debt is normalized, and saving is deprioritized.
In the context of education, this mentality has profound consequences. While borrowing can provide immediate access to college, it leaves students and families saddled with debt that can take decades to repay. On average, graduates with student loans owe $37,574, with monthly payments averaging $393 (Education Data Initiative, 2023). This debt burden can delay major life milestones, such as purchasing a home or starting a family.
Generational Priorities: A Cultural Divide
The cultural shift from saving to borrowing is also reflected in generational differences in financial priorities.
Older Generations
Baby Boomers and members of the Silent Generation were often raised with a strong emphasis on frugality and delayed gratification. These generations were more likely to save for significant life expenses, such as college or a home, and to avoid debt whenever possible.
According to the U.S. Bureau of Labor Statistics, savings rates were significantly higher in the mid-20th century, with personal savings peaking at 17% of disposable income in 1975 (BLS, 2023).
Younger Generations
In contrast, Millennials and Gen Z have grown up in a culture of easy access to credit, rising consumerism, and stagnant wages. While these generations face unique economic challenges, such as higher costs of living and student debt, their financial habits also reflect a shift in priorities.
A 2022 survey by Deloitte found that 49% of Millennials and 46% of Gen Z respondents prioritize spending on experiences and lifestyle over saving for long-term goals (Deloitte, 2022).
A Need to Reprioritize Saving
The cultural shift from saving to borrowing for education is a multifaceted issue rooted in changing financial norms, greater access to credit, and shifting priorities. While rising college costs and economic pressures play a role, the decline in saving is ultimately a reflection of broader societal changes in how Americans approach money.
To address this trend, families and individuals must reprioritize saving as a core financial value. This can be achieved through increased financial literacy, greater use of college savings tools like 529 plans, and a cultural shift back toward long-term planning and delayed gratification. Without these changes, future generations may continue to face the burden of excessive debt, with all the economic and personal consequences that come with it.