There are two primary ways to look at the student loan crisis. More than $1.2 trillion is owed in federal and private loans – this is an economic issue. The average debt on an individual basis is $27,000 – this is a personal issue for the student loan debtors. There are myriad reasons for the overarching student loan crisis – rising tuition, easy access to loans, unwieldy university budgets, university lobbying of Congress and many other issues.
But when it comes to what’s causing problems for individual borrowers, there are three missteps to be aware of so they can be corrected ASAP to get your debt under control and paid off as soon as possible:
Problem #1 You Don’t Understand Your Student Loans
When you’re new to college, in the midst of your middle years or sweating your senior finals, few take the time to think about their student loans. The financial aid office tells you what you need to borrow to keep going and slide forms in front of you to sign. You do and you press on. But few read those precious documents, keep track of how many loans they are taking out or how much the borrowings add up to. There are a number of different kinds of federal loans plus private loans.
The Fix: To get a grip on your debt, you must know what you owe and to whom. We can help with that. Sign up for a free student loan management account at Tuition.io. Register any private loans you have and provide your NSLDS information and we’ll compile all your loans into one easy to read dashboard so you can see how many loans you have, who owns them, how much they are and what your total debt is.
Problem #2 You Can’t Afford to Pay Your Student Loans
Once you graduate and the bills start rolling in, you may be stunned at how much your total payments are and if you’re struggling to find a good job, you may find you simply cannot afford to pay them. It can be confusing if you have a bunch of different loans and have several payments due each month. Your lender may try to tempt you to consolidate the loans for your convenience, but before you do this, use this calculator to find out if this could end up costing you more in the long run.
The Fix: If your loans are not affordable on your salary, don’t let them run late. Instead, immediately apply for Income Based Repayment or Pay As You Earn. Your payments can be as low as $0 per month and your balances will be forgiven after 20-25 years of affordable payments. If you start earning more, you can pay in more to fast track your debt, but IBR/PAYE will take care of the immediate shortfall.
Problem #3 You Don’t Think You Can Deal with Your Student Loans
If you are not earning stellar wages or your student loans are way out of proportion with your income, you may be stressed about the specter of the debt looming indefinitely. If you read headlines, you may see that many older Americans are retiring still owing student loans. You may worry that this will be your fate. You may be tempted to shrug off your debt because you feel it’s insurmountable. You may be doling out your payments each month but feel like your life will never get any better.
The Fix: The recent availability of flexible repayments plans such as IBR or PAYE can offer a reprieve from overwhelming monthly payments. The availability of forgiveness under IBR, PAYE and PSLF mean that your loans should not torment you into your golden years. Take a deep breath, shake off the stress and turn to our blog for tips to keep you motivated and feeling hopeful about your future.