Student loans can be a great thing for some students. Mainly those that wouldn’t have had an opportunity to get a higher education without them. These are generally teens and young adults from lower-middle class families. Not making enough to be able to pay for it themselves, and at the same time making too much to get any financial aid or government grants.
But what most people don’t realize is that there’s a good chance that they will be stuck paying off their student loans for decades after they finish school.
In our uncertain economy, more and more people are going to college in hopes of a higher income and a higher standard of living. In fact, right now there are more high school graduates going to college than ever before.
Are you ready for the scary part now? Over the past 30 years, the cost of attaining a college education has risen by over 1000 percent. Two-thirds of students who earn four-year bachelor’s degrees graduate with an average student loan debt of more than $25,000. The only form of debt totaling more than student loans is mortgage debt, according to a report by the Federal Reserve.
Up until 2009, students that took out student loans were more likely to own homes and have higher credit scores than those who did not. Fast forward to 2014 and students with loans are less likely to own a house, they have a worse credit score, are less likely to have a car loan, and are more likely to be living with their parents.
Since 2008, most forms of consumer debt has gone down and people that took out personal loans have been less likely to default, yet the percentage of student loans defaulting has actually started going up.
Debt from student loans is the second biggest form of consumer debt in the United States and has nearly tripled since 2004. The total debt owed on student loans in the U.S. is over one trillion dollars and counting.
Refinancing is currently not an option for those with student loans.
To remedy this awful situation Senator Kirsten Gillibrand sponsored the Federal Student Loan Refinancing Act in May of 2013. This act would enable those with interest rates on their debt above four percent to refinance at a fixed rate of four percent, lowering monthly payments by two percentage points, which may not seem like much, but when you owe over $20,000, it is quite a substantial amount.