Aug 16, 2019 10:49 PM EDT
Why Student Debt Problem Is Very Common Today
If you're one of the many graduates struggling with the student debt problem, then you're not alone. The total student loan debt of American currently stands at around $1.5 trillion. Yep, you read that right! In fact, the average student loan holder will have about $22,000 in student loans. College student loans problems are quite common for a few reasons, and many student loan holders are finding it hard to get themselves out of the conundrum. Here are the most common reasons why the student debt problem is so common today.
People don't know what Kind of Student Loans they have
The largest student loan issuer is the federal government itself through the U.S. Department of Education. That said, it can be very hard for individual students to tell whether they have federal loans or private loans. The reason why is that the government issues two types of federal loans: the first type is directly owned by the government while the second is owned by private lenders and only backed by the government. The second type is known as Federal Family Education Loans and is considered as federal loans, despite being privately owned. They also happen to have low interest rates since the private lenders will be reimbursed by the government for the balance in case you default.
So if you would like to figure out which type of student loan you have, head on to the National Student Loan Data System and look under Financial Aid Review to check your loan type.
The Monthly Payments are too High
This is one of the most common student loan issues facing borrowers. So much so that they often have to start working while still in school just to help them pay for the loans. It can be quite much, even taking away the time that they need to do assignments. Luckily, they can often find services to help with those assignments online. As a student, I can get a professional to write me an essay while I work to get some money for upkeep and to help out with loan payments. With such services, life can be a little easier. But monthly payments can still be quite high.
This problem mainly started after the global recession of 2008. Ever since it's been hard for young people to find well-paying jobs after they graduate. This has made it hard for them to make the minimum monthly payments on their student loans.
Luckily, there is a way to make things easier. If you have federal student loans, you can get on the income-based repayment program. This program adjusts your payments so that a maximum of 15% of your current income will go toward the repayment of your student loans. This is a boon for those who need some relief in the insane amounts they have to pay toward their student loans every month.
Additionally, with the IBR, you get your payment period stretched out to 25 years instead of the normal 10. It may mean more interest, but at least it makes the individual payments easier. Moreover, if you still can't pay your loan within the 25 years, the government will forgive any outstanding amounts.
If you have private student loans, the story is a little different. In that case, you should call your lender and let them know that you are having a hard time making the minimum monthly payments and that you would like an extended repayment plan. In most cases, they will gladly do that. However, remember that will also mean more interest in the long run.
People feel like they'll never be able to pay off their Student Loans
Let's face it, the cost of education in America is rising every year and many students are taking higher and higher debts to fund their increasingly expensive education. The fact that the job market is tougher than ever does not help the situation and it leaves many wondering if they will even be able to repay their student loans.
Luckily, there is some reprieve for those with direct federal loans. The Public Service Loan Forgiveness allows those in public service jobs to eliminate the remainder of their student loan debt after working for 10 years at the job.
The qualifying jobs include jobs with local, state, and federal governmental agencies as well as tax-exempt non-profit organizations. Eligibility even extends to those who work in law enforcement, emergency services, and health care.
So what if you don't work in public service? You can try and use online tools to help you restructure your payment to make it easier and also gain some financial literacy. In case you can't pay at all, you can consider the four levels of non-payment:
Delinquency, where you haven't made recent payments.
Deferment. You can call your lender and ask them to temporarily suspend payment for an agreed time. Sometimes they won't even charge you interest during that time.
Forbearance. Here you stop making payments but you will still be charged interest.
Default. This happens after you have not made agreed-upon payments for over 9 months. In this case, the loan will be turned over to a collection agency.
It is important to understand the different scenarios so you know which to move into when you can't make payments and avoid default at all costs.
Hopefully, you will be able to pay your student loans eventually and a broad solution will be found to America's student debt problem. For now, however, the above tips should give you some sense of direction in solving your own student debt problem.
Robert Everett is a content writer with an intense interest in education, technology, finance, and self-development. His blog posts and articles focus on these main areas and he is always trying to learn more about how to improve life for students. You can hang out with him on his Twitter.
Join the Conversation