Student Loans: The Current State of Debt in Higher Education and How to Defeat the Trillion Dollar Monster
“I need acknowledgment, If I got it then tell me I got it then
I’m ballin’ outta control, keep on receiving the scholarships” — Drake (Scholarships)
TL;DR: Some changes are coming. Student loan debt will become a bit harder to handle. Be proactive or get burned. Skip to the tips below to figure out ways to attack one of America’s largest beasts.
America and Student Loan Debt
Rolling in dough? Got scholarships? Or is student loan debt the bane of your existence? Paying for college is becoming progressively more difficult for individuals that aren’t coming from money or don’t receive healthy-sized scholarships. Student loan debt is the $1.3 trillion monster that’s chillin’ in America’s closet. According to Make Lemonade, the average 2016 graduate is leaving college with around 37 grand in student debt.
A combination of hiked interest rates for federal borrowing and a Trump administration devout on reducing the U.S. deficit at the expense of college students is creating a post-college experience that’s just about as desirable as chicken without seasoning. When it rains, it pours.
So what exactly are the recent changes?
- Undergraduate interest rates for federal borrowing rose to 4.45 percent from 3.76 percent — will amount to thousands of dollars over the duration of a loan
- The Trump Administration is positioning itself to:
- Get rid of Public Service Loan Forgiveness
- Do away with subsidized lending — the thing that gives students the opportunity to not pay interest until their student days are done
- Alter income-driven repayment plans for graduate students — graduate students already get the short end of the stick
Basically, the government believes that the economy is strong enough to raise rates. So maybe these upcoming years may not be a good time to refinance. And Trump’s squad wants to cut spending, so instead of more taxes for the mega-rich, he’s yanking resources from the households that need the help the most. Very interesting times in America for folks with student loan debt.
Student loans have become a cash cow for key players in the industry. What began as a public driven initiative to help democratize access to higher education has grown into a bloated beast that has an insatiable appetite for dollar bills. The industry is bringing in around $140 billion every 365.
One-third of college students are leaving school debt free. Meaning two-thirds are in this bloody war between debt and “the good life”. And let’s not even harp on the difficult lending environment for graduate students. As graduate school becomes the new undergrad, many Americans come out of school taking haymaker blows straight to the face from lending institutions.
This post isn’t to alarm you, but to keep you aware. Times are changing and if you don’t come from wealth or rack up scholarship money, you have your work cut out for you. But as all of my posts, I talk about not how to “lay down” but how to overcome. So what things can you do right now to put yourself in a better financial position? There are lots of strategies floating around, but here are some of the best actions that you can take.
Want to become debt free?
- If you have a strong income, pay more than the minimum — ease off on the brunch mimosas and tighten that budget (you’re paying for a lot of mimosas in interest).
- Strategize extra ways to create income — in the gig economy, finding extra work as a contractor is easier than ever. If you’re making a few bucks outside of the day job, send some of that cash to pay off student debt.
- Create a student repayment plan — map out exactly when you should be debt-free based on your current repayment schedule. If it’s not as soon as you’d like, find a way to send more cash to pay off loans.
- Use your extra money to get out debt — don’t ball out on your bonus, take a hefty percentage of your extra cash to pay off debt. When that tax refund rolls around, consider putting at least half towards paying off loans.
- Take full advantage of tax deductions — you’re allowed to deduct up to $2,500 of your taxes for the student debt interest that you pay each year. This method will automatically save you some mula.
You only have to pay off your student loan debt once. Having a better strategy than most can save you thousands upon thousands of hard earned dollars. We can’t always control how the world changes, but we can always control how we react to those changes.
What extra measures are you taking to get out of debt? Are there any great strategies that I missed? What are your thoughts on the changes in the student loan debt landscape?
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