Student loan debt is the fastest growing debt category in the nation and has hit an all-time high of $1.2 trillion. It is the second largest debt category behind mortgages. According to Experian’s data, 40 million consumers have at least one open student loan and about 32% are between the ages of 18 and 34. However, the student loan debt our country is carrying cannot only be thought of as a millennial issue. Those 65 years and older, presumably retirement age, hold only 4% of the debt but with a huge balance of $18.2 billion.
The reason the entire nation should be concerned is because student loan debt is different than other debt. Student loan debt cannot be written off in bankruptcy and over time may cause a problem for the housing market. Millennials carrying high student loan debt may not qualify for or afford to move into home ownership. How quickly will millennials be able to afford to go into the housing market and secure a mortgage when they are leaving college with an average debt load of $29,000? Unfortunately, even though more and more people are going to college, education costs are not coming down. They are increasing. According to the Department of Education data, the cost of one year’s tuition, room and board, and other fees, at the average 4-year college was $23,872 for the 2012-2013 academic year.
Student loan debt is a challenge that must be faced by the entire country and all ages. So what can you do?
- Before attending school and taking out student loans: Do your research. Use the Consumer Financial Protection Bureau’s Know Before You Owe student loan tool. This tool can be used to compare college costs and financial aid offers. Save! Save early, save often (think automatically), and save consistently. Check out MilitarySaves.org for strategies, tips, and tools to save effectively.
- While going to school: try to borrow as little as possible for student loans. Even if you are offered more, try to only take the minimum of what you will absolutely need. Work part-time or full-time, whatever you can do to keep the debt from piling up and getting away from you.
- After school/dealing with the debt bill: Pay more than your minimum monthly payment to pay off the loans as quickly as possible. Try not to delay paying your loans with deferment or forbearance. Try to pay something toward your loans all the time. While working to pay off your debt, you may also want to be aware of scams that target the student debt market. This article from the Better Business Bureau has some great tips to avoid being a victim. There are federal programs that can assist in student loan forgiveness, cancellation, etc. but these are only available for certain types of federal loans, not private loans and have very specific parameters.
Student loan debt is not going to go away, but there are strategies we can all use to assist in lowering the debt load our country is building and carrying.
Student Federal Aid – an office of the Department of Education
CFPB Student Financial Guides – Know Before you Owe
How to Pay Off Student Loans Within 5 Years of Graduation – USNews Money article