Nearly 20 million Americans attend college each year. Of that 20 million, close to 12 million – or 60% – borrow annually to help cover costs. There are approximately 37 million student loan borrowers with outstanding student loans today. As of the fourth Quarter of 2014, the under 30 age group has the most borrowers at 14 million, followed by 10.6 million for the 30-39 group, 5.7 million in the 40-49 category, 4.6 million in the 50-59 age group and the over 60 category with the least number of borrowers at 2.2 million for an overall total of 37.1 million. There is roughly $1.16 trillion in total outstanding student loan debt in the United States today, WOW!
Of the 37 million borrowers who have outstanding student loan balances, 14%, or about 5.4 million borrowers, have at least one past due student loan account. Of the $1 Trillion in outstanding student loan debt, approximately $85 billion is past due. For every student loan borrower who defaults, at least two more borrowers are in line to become delinquent. Two out of five student loan borrowers – or 41%- are delinquent at some point in the first five years after entering repayment. This is only students that complete college. This does not include drop outs, where delinquency is over 55%. This is a true National Nightmare.
The roots of this staggering amount of debt and the high rate of delinquency can be seen in the economy and in the schools that benefit from them. Without good paying jobs, those leaving school can’t afford to repay their debt. Careers that may have been in demand when school was started may not be in demand when school is done. The colleges are also really only concerned with enrolling students in classes and not with the consequences of that borrowing. If 60% of students are borrowing then colleges must be relying on this income to stay open and it makes you wonder where their loyalties lie.
Federal loans do require counseling prior to borrowing but this is barely effective as it can be done online with no professional interaction. These barely young adults are thus required to make financial decisions that will impact, up to, the next 30 years of their life, decisions whose implications they will not truly understand until they are done with school, decisions even their parents don’t truly understand. The majority of those delinquent loans for those 50 and up are most likely co-signed loans for children who couldn’t afford to follow through on their promise to pay the debt and the parents or grand-parents are now stuck with loans they too can’t afford.
What Student Loans Really Cost – The average student loan debt today is $29,400.00 per student. A standard repayment plan of 10 years will have payments of $339.39 per month. Total payback of the loan will be $40,726.80, which is over $11,326.00 in interest, over a quarter of what was originally borrowed. If that payment is too much, you can take the same loan amount and stretch it over 25 years.
This will lower the payment to $205.36, but your payback will be $61,608.00, which $21,608 in interest – or over half the amount originally borrowed. If you are lucky enough to find a job after college and you are able to make the average income of $45,000 a year you’ll end up bringing home about $2800 a month. That means that 10 – 20% of your income will need to go to student loan repayment alone. That is not taking into account your rent, utilities, living expenses or other debt repayment. Now you can understand why more and more kids are going back home after college.
Student Loans and Your Credit – A student loan is like any other unsecured installment loan, except there are added protections for the lender. This means that they also impact your credit like any other loan would. Keep your loans current and this will benefit your credit standing. Fall behind, regardless of the reasons or your intentions, and you will harm your credit for up to 7 years. Furthermore, as long as a balance remains then it will impact your debt to income ratio and the amount you will be able to borrow from other lenders.
Student loans do come with some benefits that aren’t normally associated with normal unsecured installment loans, mainly payment deferments. All student loan payments are deferred (suspended) while the student is going to school full time and up to 6 months after completion, with an additional 36 months allotted for Federal loans during periods of hardship. This, however, comes at a cost; interest does not stop accruing even though payment is not due. If your loan is subsidized then the Federal Government is paying that interest for you while the loan payments are deferred. If it is not subsidized, and you do not make the interest payments on your own, then your balance will begin to grow. Many students complain about their growing balances, but this just further illustrates the lack of financial knowledge these young borrowers have and how they were ill-prepared to borrow tens of thousands.
Are solutions available? Simply stated, YES. What kind of help and how easy it is to access is a different matter altogether. First the amount of help available depends on the type of loan you have. Is it a Federal Loan or a Private Loan? With Private loans, the assistance available is dependent on the lender borrowed from. There is no policy private lenders must follow for students in hardship. Nor is there any motivation to help since they are protected from the debt being discharged through a bankruptcy. The government is trying to pressure these lenders to offer more options, but for now the only real option is to contact the lender/servicer and beg for assistance. If the loans are Federal then there are a number of options available. Finding those options are a different matter. You can call the loan servicer to ask for help, but if you have multiple loans then that is multiple calls for help.
This is where our agency can help. Our experienced counselors can review your entire financial situation and advise you on the options available, and this is done at no charge. At the least we will give you free advice that will help you better navigate the options available. At the most, we will assist you through the consolidation process, taking approximately 60-90 days, to help you get a payment you can afford for the small cost of $95.00. We will even help you review your eligibility for the loan forgiveness programs that are available and inform you of the costs of those programs, and yes even loan forgiveness does not come without costs.
A Debt Coach (ADC) is a Non-Profit Consumer Credit Counseling Agency, founded by a Christian businessman reaching out to the community to help people free themselves from the financial restraints of debt. ADC strives to help individuals and families burdened with financial pressures learn how to become debt free.
ADC began operating in July of 1992 offering credit counseling services to local consumers who were experiencing credit and debt problems. We offer one of the most beneficial debt consolidation programs in the Nation! We have more than 25 years’ experience providing Credit and Debt Management Services to consumers.
Everyone’s situation is different and will require a session to figure out all options. I am offering “Free” financial advice and will create a plan for success with you. The next step is yours.