Before President Obama ever took office, a student loan crisis was already looming. With college tuition rates going up significantly over the past few decades, and a greater need for Americans to have college degrees in order to find gainful employment, the way things were heading prior to 2008 was approaching critical mass.
Living up to campaign promises and the future of the country, President Obama eventually signed into law several improvements on existing federal student loan programs. Later coined as Obama Loan Forgiveness, these programs sought to make college more accessible to Americans, offer more ways to repay loans, and give college-bound students incentives to start careers in public service and high-need areas.
Yet, while the programs and their accompanying Student Aid Bill of Rights have had a positive impact, statistics show that problems with student loans still exist. As someone who’s currently making student loan payments or thinking about taking out student loans sometime soon, these facts will help you understand the importance of making smart moves with your student loans – now and in the future.
For the first time in history, student loan debt outpaced credit card debt in the U.S., when numbers were released in the summer of 2010. Since then, this debt has risen substantially, and now represents over 44 million borrowers in America who owe more than $1.45 trillion to various student loan lenders.
When you look at what this means for 2016 graduates, it’s an average of $37,712 in student loan debt per person before they ever enter the workforce.
Thankfully, things have been looking up for borrowers in the past decade. While numbers are still climbing, programs like REPAYE and IBR for New Borrowers have offered new ways to tackle common student loan repayment issues that have been uncovered from the past. Forgiveness programs, too, have given those who want to serve as first responders, teachers or in the medical field ways to find relief from their debt.
It’s only a matter of time before the effect of these programs becomes more evident. But in the meantime, economists and financial experts watch with hopeful anticipation that the issues will be ironed out through reform.
Federal student loans were the standard for many borrowers for decades. However, in the past few years more and more borrowers have opted for private loans instead. From the 2011-12 academic year to the end of the 2014-15 academic year alone, private student loan debt rose from $5.2 billion to $7.8 billion dollars.
While this trend may indicate a growing preference for private student loans, one thing future borrowers should note is that federal student loans offer borrower protections and benefits that are often far superior to private loans. This is especially true when you consider the options you have available as a federal loan borrower if you run into financial trouble.
Currently, more than 3,000 borrowers are going into default on their student loans every day. This means that each year approximately 1.1 million people are joining the list of borrowers whose loans have been delinquent for more than 270 days. This list now sits at roughly 4.2 million former college students.
With loan rehabilitation and defaulted student loan assistance available, defaulting on loans should be a lot more uncommon. Not only does defaulting on student loans ruin a borrower’s credit, it could also lead to wage garnishments and other problems that can follow an individual around for their entire lives.
Even if you’re currently late on your payments, there is hope. Before things get really bad, it’s best to consult with a student loan expert to get your payments caught up, or explore other repayment options that are more suitable.
Today, the average student loan borrower between the ages of 20-30 makes a monthly payment of $351 to their student loan lender. Part of this is due to the 10-year standard repayment plan, which spreads out payments over a 10-year period.
One thing borrowers should note, however, is the number of options you have when you have a standard repayment plan. Depending on the type of loan you have, you could be eligible for other programs that extend your repayment period for up to 30 years and substantially lowers your monthly payments.
If you have more than one student loan, consolidating your loans into a single monthly payment could do more than save you the hassle of making multiple payments each month, it could save you money in the long run – particularly if you have variable interest rates on any of these loans.
Don’t let these facts discourage you from taking action on your student loans. Whether you currently have student loans, or you’ll be going through the process in the next few years, use these facts to make smart choices on the student loan path that’s most beneficial to you.