“So how much do you have?”
It sounds like an innocent enough question. But for some Americans, the answer to that question is riddled with a sense of hopelessness, and to an extent, defeat. The answer to that question is quite often a five-figure number, sometimes six figures. Regardless of the number of digits on “your number”, it seems like everyone has some student loan debt.
2019 has seen record numbers in the student loan statistics in America. Forbes highlights the staggering number of Americans – 45 million – that carry student loan debt, amounting to a grand total of over $1.5 trillion dollars in debt. That’s right, trillion. A number more often used to refer to the enormous federal budget, it is now also used to refer to student loan debt, which, as the same article points out, is now higher overall than credit card and auto loan debt combined.
In other words, it’s bad.
LendEDU, an online financial comparison tool, sheds some light on the seriousness of the situation, especially for those who struggle to pay back. Failure to pay back your student loans on time can have devastating consequences on a person’s financial life – including, but not limited to, withholding of your tax refunds, lawsuits, and the inability to liquidate your loans should you face bankruptcy.
It’s also important to remember that student loans, just like every loan, accrued interest. In fact, some loan products, such as direct unsubsidized loans, accrue interest every day. That means that, despite your best efforts, you might be caught in a vicious circle of basically only paying interest if your monthly payments are not large or aggressive enough – such as with some income-based repayment plans.
Everything I’m just saying sounds pretty scary – I understand that. What you need to understand, though, is that the way to get out of something that you burdened yourself with in pursuit of a good, or better, education, can be overcome with exactly that – education. Financial education needs to start from before you go into college, while you are in college, and after you’re done with college. But let’s say that you already have the problem and just feel like you’re running on a hamster wheel of payments that are leading to nowhere. Yet you don’t want to be paying off a loan that you took for a two or four-year degree for the next, what, 30 t0 35 years? I wouldn’t want that either.
First, make sure you understand what kind of loans do you have. Are they federal, private or both? If they’re federal, understand if they are they subsidized – meaning the government pays interest on them while you’re in college, then interest payments are on you – or unsubsidized – the loan generates interest while you’re in college and said interest is part of your grand total due at the end. What’s your interest rate for each loan? What are your best payment options depending on your current income and your income potential? What works for you now might not work for you five years from now.
Then, make your student loan payments a higher priority when it comes to paying your debts. Many people hold onto the misconception of student loans being “good debt”, when in fact, they are forcing people, especially millennials, to delay major milestones such as buying a home or starting a family. The Baby Steps method made popular by financial guru Dave Ramsey can be a great tool to help you organize your finances in a way that allows you to modify your behaviors in order to decrease your expenses and, as a result, find more money in your budget to aggressively pay down debt.
Overcoming the student loan debt crisis starts with each person taking ownership and control of their finances, and giving every dollar a purpose. It also continues with education for present and future generations in how to keep college affordable for themselves and practicing healthy financial habits that lead to a debt-free life. Get a clearer picture of how to tackle your debts one by one until they’re gone with a Worth Unlimited Account. Ready to find out more? Contact us
References:
The College Investor. (n.d.). The Dave Ramsey Baby Steps and your Student Loan Debt. Retrieved from https://thecollegeinvestor.com/21946/dave-ramsey-student-loan/
Friedman, Z. (2019, October 14). Student Loan Debt Statistics In 2019: A $1.5 Trillion Crisis. Retrieved from https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#8c4cc2f133fb
LendEDU. (2019, October 22). A Look at Student Loan Default Rates by School & State. Retrieved from https://lendedu.com/blog/student-loan-default-rates-by-school-state/
ONeal, A. (2019, February 22). Overcoming the Student Loan Crisis. Retrieved from https://www.daveramsey.com/blog/student-loan-crisis