Student loan debt

5 Scary Student Loan Stats (& How to Not Be One)

It’s no secret that student loan debt is a huge problem in this country. Everyone from parents, to students, to the president is talking about the issue.

So how did we get here?

Some blame it on the high cost of college, and indeed, that is a huge factor. However, we also believe that planning properly for college well in advance can prevent many of the debt problems we are facing today.

Unfortunately, far too many families fail to plan, and end up borrowing too much, choosing the wrong repayment plan, or simply are unable to pay off their loans at all.

These 5 scary student loan statistics from USNews.com paint a picture of the situation we are in right now – and it’s not a pretty one….

  1. According to the Consumer Financial Protection Bureau, American borrowers have now accumulated over $1.2 TRILLION in outstanding federal student loan debt.What can you do to avoid adding to this number? First of all, make sure your student prepares well by performing well in high school to qualify for as much financial aid as possible, choosing a major that suits him or her, and doing substantial research on a variety of schools, instead of just picking one that is close to home. If your student does not feel prepared upon graduating high school, there’s nothing wrong with taking some community college courses to get started.Also, grad school can add a hefty chunk of debt, since typically there may be less financial aid available to graduate students. Consider online courses, community college, or certifications that don’t require a traditional graduate school education.
  2. A recent survey found that the average undergraduate borrower last year (2015) took on more than $35,000 in total student loan debt. For 2016, it is projected to be over $37,000! This may be an unmanageable amount of debt for some borrowers. To keep a handle on how much you’re borrowing, our rule of thumb is that you should take on no more than 1/2 your anticipated starting salary in student debt. So for example, if you expect to make $40,000 per year in the field you are entering when you graduate, you should take on no more than $20k in student loan debt.However, this may seem a bit difficult to calculate when you’re a student who isn’t even sure what field you are going into yet (this is another reason why early preparation and choosing the right field of study is important). So another way to look at this is to make sure to keep your monthly debt payments to no more than 10% of your anticipated monthly income. For example, if you are expecting to make about $3,000/month starting out, you should prepare to take on no more than $300/month in student loan payments. (You can use a repayment calculator to find out what your monthly payments will be.)
  3. 59% of (first-time, full-time) students take more than 4 years to graduate.Taking longer to graduate is a major problem for several reasons. First of all, obviously you are paying for more years of college, which can sometimes add tens of thousands of dollars to your total college bill! Secondly, tuition and living expenses tend to increase every year, so you’re actually paying more for the same education the longer you stay in school. And thirdly, since you are putting off entering the workforce, you will have fewer earning years to pay off the extra debt you accrued.How can you make sure you (or your students) graduate on time? As we’ve mentioned before, planning is key! By meeting early and often with a college and career planner in high school, as well as your academic advisor once you enter college, you can make sure you are on the right path to graduating within a reasonable amount of time.If you work while in school, keep your work load low enough that you don’t hurt your study time or focus. Working too much can lead to a lower GPA, more time in school, and more debt. Typically you will want to keep your work hours while in college to no more than 10-15 hours per week if possible.
  4. 15% of recent college graduates default on their student loans within 3 years.If you go 9 months without making a student loan payment, you will be considered in default. This can substantially affect your credit, making it much more expensive and difficult to qualify for other types of credit, including credit cards, car loans, and even a mortgage. The government can also garnish your wages or your tax refund, so being in default is no joke.If you are having trouble making your payments, contact your student loan servicer and see if you can consolidate your loans, apply for a “Pay As You Earn” plan, or qualify for deferment or forbearance.
  5. Borrowers over 60 still owe $43 billion in student loan debt.That’s right – if you take on too much debt, you may be trying to help pay for your kids’ college costs, while still working on paying off your own!To make sure this doesn’t happen to you, plan ahead for how your family is going to pay for college costs. Only take on the appropriate amount of student loan debt, and focus on an accelerated repayment schedule, such as paying off higher-interest loans first, and specifying to your loan servicer how you would like extra payments applied.

These student loan stats are scary, all right, but you don’t have to be one of them! By planning ahead, working hard, and making sure you take on the appropriate amount of debt, you can avoid being a scary statistic, and instead, be an example of how student loans, when properly handled, can be a helpful tool to get you into the career of your dreams!

We can help with every aspect of this process. From career planning, to choosing the right school, to putting together a solid plan to pay for it with a minimum amount of debt, we have got you covered!

Contact our college planning team today for a FREE, no-obligation family strategy session. Just call 614-536-0246, or visit our College Planning website for more information or to attend one of our free college planning workshops.

 

 

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