U.S. student loan debt hit an all-time high of nearly $1.5 trillion in November 2019, according to a Bloomberg analysis. Almost 81% of this debt consists of federal direct loans, as reported by Federal Student Aid (FSA), an office of the U.S. Department of Education. In early 2020, the number of student loans in repayment reached $686.5 billion in the U.S., while $119.8 billion worth of student loans were in default.
These numbers aren’t surprising when considering the average tuition for the 2019-2020 academic year for a four-year in-state public college averaged $26,590. The average budget at a private college was $53,980, according to a College Board report, Trends in College Pricing with no slowdown in sight.
Taking out student loans to pay for college
Most college students take out loans to pay for college. In fact, about one-third of students under 30 have student loans, according to the Federal Reserve Board’s 2018 Survey of Household Economics and Decisionmaking.
That’s because few people have between $30,000 to $50,000 sitting around to pay for a college education, which is about double what a student might have spent 10 years ago. The increase is partly due to more and more young adults attending college and the cost to get a college education. Unfortunately, in that same survey, about 36% of students ages 25 to 39 with student debt say the financial costs to attend college outweigh the benefits of their degree.
But for many graduates, student loans make a college education a reality. And while most students borrow money to attend, if it leads to higher earnings in the future, the debt may outweigh the expense. If you need to take out a student loan, explore your options first. An online marketplace like Credible can help you find the lowest rates.
Suspension of student loan payments
To provide relief to student loan borrowers during the coronavirus pandemic, the Trump administration suspended loan payments a temporarily set interest rates at zero percent. The original announcement was to continue for at least 60 days, with an end date of September 30, 2020. However, the Secretary of Education is continuing the temporary delay of payments and waiving all interest on student loans held by the Department of Education until December 31, 2020.
It's important to note, though, this relief only applies to federal student loans.
If you're struggling to pay your private student loans, refinancing them may be an option with today's low rates. Use an online tool like Credible to view a rates table that compares rates from multiple lenders at once and see how much money you could be saving.
Post-grad life with loans
It’s not surprising that college graduates with student loans are more likely to struggle financially than those without loans. After all, they start off in debt and may not find a good-paying job for some time. But because it takes an average of 10 years to pay off loans under the Department of Education repayment plan, borrowers must figure out how to get rid of their debt more quickly. Of course, the time to repay loans depends on how much a student borrows, if they get their degree, and what school they attend.
JoBeth Evans, a college instructor at the University of Arkansas and College Success Coach, offers these tips to repaying student loans fast: “Tackle debt starting from smallest debt to biggest debt, regardless of the interest rate. Tacking smaller debts first will help build momentum.”
Evans goes on to say, “If a student is thinking about a career that is considered a 'high needs' career, like healthcare workers or teachers, there may be reimbursement grants that will pay off a portion of student loan debt.”
If possible, borrowers should resist the temptation to take on additional debt, like a new car or house, and instead put that money toward their student loans. Also, Evans says that although every company is different, “a quick Google search will reveal companies who help students pay off their student loans, or get a second job. At the end of the day, the surest way of paying off your student loans quickly is by having extra money to put towards loan payments every month.”
Mark Twain once said, the lack of money is the root of all evil. Students with heaps of student debt may agree. Thankfully, there are ways to get out from under the amounts owed. Visit Credible to learn more about private student loans and get personalized rates from multiple lenders without affecting your credit score.
Evans reveals that “the dream of paying off student loans can become a reality. Will it be easy? No. Will the hard work and sacrifice be worth it? Absolutely!”