Getting a quality education may land a better job in the future. With competition for good jobs getting steeper—and more and more applicants—the more education, the better.
However, what happens when the student debt wall is toppling over? People around the country are still paying on their loans at outrageously high-interest rates. In the end, they are being swallowed whole by a debt that appears impossible to pay off.
What is the Average Student Loan Rate?
No matter the education received, student loans are expensive. According to Forbes, the typical monthly student loan payment falls between $200 and $299 per month. It is possible to have a wildly higher payment than that.
Across the U.S., the total student loan debt is $1.75 trillion. The average student loan interest rates fall between 5% and 13%, depending on the type of loan. The rate can be higher or lower based on the following:
- how much you borrow
- credit scores
- school you are attending
- course of study
- and more
Why it Doesn’t Work
It is no mystery that paying off student loan debt is tough—really tough. Take for example a student who paid off their total $70,000 worth of student loans… to still owe $98,000. That is why this system does not work.
This system is designed to be a never-ending cycle of a nightmare. The more payments you make, the further away the end seems to be. In addition to the high-interest rates, each year, the rate can change. To make matters even worse, there may be penalty fees for not paying the total of the loan on time.
The average student borrow takes up to—and sometimes over—20 years to pay off. People who borrowed for graduate degrees? A whopping 45 years! And don’t forget that if you for some reason cannot pay back the loan within 90 days, you get dropped into delinquency, which then takes a toll on your credit rating.
Enter more heartbreak as you now realize that after 270 days of the debt being considered delinquent, your case is now transferred to a collection agency. The news continues to get worse and worse, with seemingly no hope for students who cannot quickly pay off their student debt.
Why is it So Hard to Forgive Student Loans?
With the Fed making so much money between taxes and additional monies, why is it so hard to forgive student loans? Erasing this debt can greatly improve the economy as students will have money to put back into it.
President Joe Biden introduced a new bill that would cancel up to $10,000 in federal student loans. This was the resolution after Senators Chuck Schumer and Elizabeth Warren called on him to cancel up to $50,000. The notion continues to brew controversy from people who suffered through paying their entire student loan, calling this new idea “unfair”.
So Now What?
Many students feel at the end of their ropes. However, all hope is not lost. As we wait for the final resolution from President Biden on the student loan forgiveness program, here are some great tips to help you through paying your student loans:
- limit your debt by getting a part-time job whilst in college
- set up automatic payments to ensure you don’t miss a payment
- make additional payments whenever you have the extra funds
- create and stick to a budget
- consider refinancing
- apply for loan forgiveness
Keep the faith as the behind-the-scenes forgiveness plan is happening. With more certainty than not, many analysts and experts believe these forgiveness plans will stick.
Student debt forgiveness needs to happen. The economy has changed, and now with inflation and a possible looming recession, we need the money back into the economy more than ever.
Yes, many people had to endure the paralyzing financial effects of paying off their student loans in full, yet students now may have an opportunity to strengthen the economy for everyone. This should not be viewed as unfair or competition. These debts need to be forgiven.