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The State of Student Loan Debt in America Today

October 24, 2018

Education is an investment in one’s future. It opens doors to greater possibilities. It empowers people to reach their full potential. But for many, college has become an anchor instead of a sail. Crushing student loan debt can hinder a graduate’s ability to focus on the future. Some must choose careers based on salary instead of passion, just so they can handle loan payments. The constant need to earn more money stunts employee loyalty and justifies job-hopping. Even after refinancing student loans, debt still delays graduates from buying homes and starting families.

 

It’s not just an unfortunate few saddled with student debt. Consider the following statistics:

 

  • More than 44 million Americans currently carry student loan debt.
  • The total combined debt is nearly $1.5 trillion. That’s more than the total amount of credit card debt owed.
  • Student loan debt is equivalent to 7.6 percent of the U.S. GDP in 2017. To put it another way, retiring the full amount of student loan debt would take 7.6 percent of the value all the goods and services generated in the U.S. economy for a full year.
  • The average debtor owes $39,400 in student loans. That’s equal to 70 percent of the median household income in the United States, which is $56,516, according to the 2015 U.S. Census.
  • On average, student debt is far greater than the annual salary of a new college graduate. According to the latest Bureau of Labor Statistics, the average American ages 20 to 24 earns just over $28,000 annually. It’s slightly better — $38,400 — for Americans between the ages of 25 and 34. However, that’s still less than the average overall student loan debt.
  • According to a 2017 PricewaterhouseCoopers survey, 40 percent of millennial employees have a student loan. Over 80 percent of them say student loans have a moderate or significant impact on their ability to meet financial goals.

 

New doctors carry an extreme amount of medical school student loan debt. About 75 percent of new doctors in the U.S. graduated with debt in 2017. The average amount is now close to $190,000.

 

This explains why New York University will now grant all medical students free tuition. That is approximately $55,000 a year per student.

 

“We thought it was a moral imperative because it’s very difficult for medical students to incur the debt burden of medical school, as well as the additional time burden of training,” Dr. Robert Grossman, dean of NYU School of Medicine, told ABC News.

 

According to the report, student loan debt can “scare away” students from a career in medicine. It may also prevent graduates from pursuing a lower-paying specialty like pediatrics.

 

Clearly, there is no quick fix for student loan debt. However, several public and private programs can ease the burden. These initiatives continue to grow as more employers recognize the value of offering financial benefits, such as student loan repayment assistance.

 

Common student loan assistance programs include:

 

  • The Public Service Loan Forgiveness Program is a federal program designed to forgive student loan debt for employees of certain public and nonprofit jobs.
  • The Federal Perkins Loan Cancellation and Discharge forgives a certain percentage of student loan debt after every year of service. There are a number of ways to qualify for this program.
  • Both the Pay-As-You-Earn (PAYE) and the Income-Based Repayment (IBR) programs set repayment cap amounts based on income and family size. They also forgive remaining debt after a set number of years of qualifying payments.
  • Student loan forgiveness programs designed specific careers such as teachers, nurses, and lawyers.

 

Public programs may be a great fit for some. But for others, they may actually end up costing more over time. When considering a deferment or forbearance program, make sure you are not accruing additional interest. If so, this will then be capitalized and added to your original principal balance. Programs like IBR can be misleading. They can set graduates up to make payments only towards the interest rate accruing that month. This means they never actually apply to the principal balance of the loan. And it keeps the loan balance the same over time even though payments have been made towards the loan.

 

Before choosing a program, graduates should crunch the short-term and long-term numbers. It’s easy to get caught up in a program’s immediate impact. After all, you may only need a little breathing room in your budget. However, it’s this lack of knowledge surrounding these programs that is fueling the student loan debt crisis.

 

In response, more private employers are adding student loan and tuition assistance programs to their benefits packages.

 

“Employer-sponsored third-party student loan repayment assistance programs are projected to grow quickly in the future,” according to a Consumer Financial Protection Bureau (CFPB) report on student loan repayment assistance programs.

 

According to a January 2017 WorldatWork survey:

  • 4 percent of employers surveyed offer student loan debt repayment assistance.
  • 11 percent offer employee scholarships and student aid.
  • 23 percent have scholarships available for employees’ children.
  • 14 percent offer college savings plans as part of their benefits package.
  • 87 percent offer tuition reimbursement to current employees for career development opportunities.

 

A similar employee benefits survey by the Society of Human Resource Management showed that the number of employers offering student loan repayment programs increased from 3 percent in 2015 to 4 percent in 2017.

 

In general, the larger the company, the more likely it is to offer employees student aid benefits. Companies can use these programs as a recruiting tool to attract recent graduates.

 

Still, experts agree there’s much more that needs to be done.

 

Summarized the CFPB: “Recognizing that significant student debt can have a domino effect on consumers’ financial lives and overall financial wellness, reports suggest an increased interest by both large and small employers in exploring benefits to help their employees pay down student debt or help manage their employees’ student debt stress.” Most of these initiatives are steps in the right direction. However, there is still a long road to recovery ahead for those affected by the student loan debt crisis.

 

This guest post was authored by Colin Nabity. Colin Nabity is the Chief Executive Officer of LeverageRx, a digital lending and insurance company for healthcare professionals. Through software technology, LeverageRx helps healthcare professionals find better rates on disability insurance, medical malpractice insurance, student loan refinancing and mortgage loans.

 

9 Signs It’s Time to Refinance Student Loan Debt

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2019-02-22
Understanding Student Loan Payments

There are many options when it comes to paying student loans, and just as many questions! Questions like what these terms and situations can mean for a borrower. If you have questions about your student loans or want to learn more about how you can manage your repayment, check out these tips on understanding student loan payments.  

What is a student loan servicer?

  Your student loan servicer is the company collects your payments. According to Consumer Financial Protection Bureau, they typically handle most administrative task associated with your loan. Servicers do things like, answer customer service questions and enforce regulations provided by your lender related to your loan. You pay them for your loan and they give you options for repayment and deferment. It’s likely you’ll take out a student loan with one company and end up getting a different servicer. Your servicers can change too if your loan is transferred.  If you choose to consolidate or refinance with a company that gives you lower payments, better interest, or quicker payoff you’ll probably receive a different servicer.  

When should you start making payments?

  Start making loan payments whenever you can. Most student loans allow a period of non-payment while you are in school, known as a grace period.  On average most student loan lenders require payments to be made when the borrower is at less than half-time status for six months. You don’t have to wait until six months after graduating to make payments, though! If you can make payments while in school, you will save on interest and cut the time it takes you to pay off your student loans.  

What’s a student loan grace period?

  The grace period is typically a 6 month period that occurs after graduating, dropping below half-time enrollment status, or leaving school. During the grace period, you are not required to make payments on your student loans. Grace periods will vary based on the student loan lender that you have. Know what your grace period is so you aren’t caught off guard with late payments.  

Can I pay extra on my student loans?

  Yes! There are no prepayment penalties for federal or private student loans. Prepayment penalties are fees charged for reducing your loan balance or paying the entire loan off early. Many other types of debt like mortgages can have a prepayment penalty. Prepayment penalties were created to limit early payment of a debt, but no need to worry about that with your student loans. Instead, pay attention to how additional payments are applied to your loan.   If you make payments online some loan servicers allow you either pay extra on the principal or apply the additional toward interest on the next payment. Basically, if you choose to pay over the minimum depending on who your lender is, you may need to specify the amount that is a prepayment. Prepayments on your loans go towards the principal balance.  You should aim to make prepayments sometimes referred to as overpayments because it lowers the total amount of the loan. When the principal balance decreases it reduces the amount of interest you’ll pay in the long term. The next monthly payment will usually remain the same. Since you’re not applying additional money toward your next payment if you choose this option.  

Check Out This Prepayment Calculator

  Not all loan servicers will direct prepayments towards the principal of your loan unless specified by the borrower. Some lenders will count the prepayment as a payment towards your next monthly payment.  That can make it seem like your extra payments are hardly affecting your balances at all.   Instead, try to direct additional payments toward one loan’s principal. For example, if you have several loans through the same servicer, but one is $1,000, you can pay that off within a year. If you pay an extra $100 per month on that one $1,000 loan principal- it will be gone faster! If you’re not allocating prepayments strategically, you won’t see this same kind of progress.  

What if I can’t pay my student loans?

  There are limited options available when you can’t pay student loans. Weigh your options carefully. When making student loan decisions make sure you’re not adding stress to your future. First, contact your servicer immediately. You’ll have more flexibility if you stay on top of repayment before you start making late payments or missing payments. Avoid missing or late payments at all costs! Not only will late or missed payments damage your credit they put you at risk for extra fees. In addition to damaging your credit, risking additional fees, you could lose benefits available to only those who pay on time.   Repayment Options (Not a Long Term Solution) Look at repayment options. If you can’t pay with the plan you’re currently on there may be a better repayment option. If you are able to select another repayment option that lowers your payment you will want to consider doing so temporarily.  Doing this quickly will avoid you being late on future payments. It’s important to note that repayment plans are not a long-term solution to paying back student loan debt. We wouldn’t recommend for the long term because in more income contingent repayment plans the monthly payment isn’t covering the interest that is accruing during that period. Therefore, you can make a payment every month but the overall loan balance remains the same or could even increase!   Consolidating Student Loans If you’re in good standing on your loans, but want to reduce your payments student loan consolidation might be a good idea. Consolidation can make it easier for you to manage paying all of your loans, open you up to other repayment options, and reduce fees. It’s not a sure thing, but it doesn’t hurt to investigate this option and see if it is right for you.   Deferment or Forbearance: Use with caution! The last options to consider are deferment or forbearance. If you can avoid these options like changing repayment or consolidating, do it! Usually, borrowers have to be in financial hardship to qualify for deferment or forbearance. That doesn’t mean you’re off the hook because you’re in a tough financial spot. Depending on the loan you have, your interest might be added to the principal balance. This is really not ideal because it means your balances will grow. When you start paying again, your balances will be higher than where they are today. This is called capitalized interest—it equates to paying “interest on interest” and can get out of control fast if you use deferment or forbearance for longer-term hardship.   Most people don’t qualify for loan forgiveness because they are having a hard time paying their loans, but be aware that is possible. If you have developed a disability that precludes you from using your education or went to a school that has since shut down you might be eligible for forgiveness. Don’t count on this as an option, and don’t delay if you can’t pay your loans. Start investigating what’s available to you as soon as possible.  

What are income-based repayment options for student loans?

  Private loans may have options available that will lower your payments if you have a lower income, but the standard income-driven repayment plans apply to federal loans. Your monthly loan payment is calculated on your income. Your income is based on some stipulations and it may be taken into account things like your family size.   Income-Based Repayment The standard income-based repayment plan adjusts your payment if your loan payments are more than 10% of your discretionary income. Based on when you took out your loans, there may be other benefits or stipulations to meet in order to qualify. Regardless, you’ll have to calculate your loan payments based on your income and family size through your servicer.   Income-Contingent Repayment This type of repayment limits payments to 20% of discretionary income. The income will be based on income and family size. It is the only option available to Parent PLUS loan borrowers and requires PLUS borrowers to consolidate their loans to qualify.   Pay As You Earn and Revised Pay As You Earn There are limits on which form of this repayment plan you can qualify for. These qualifications are based on when you took out your loans. On the Pay, As You Earn plan you’ll have payments that correlate to 10% of discretionary income. The payment will be based on how much money you’re making and limiting the term of the loan to 20–25 years depending on whether you were a graduate or undergraduate borrower.  

Learn More About Parent Loan Refinancing

   

How does refinancing change my student loan payments and payback?

  Refinancing opens you up to lots of different options. Some qualifications to refinance include illustrating a responsible credit history. People often look into refinancing when interest rates are high, they have a steady income and good credit. Refinancing could help borrowers qualify for lower interest rates. Sometimes people refinance in order to get new loan terms and pay off their loans sooner. Shortening the loan terms on your loan can help you to pay less interest over the life of the loan. Borrowers will refinance to a longer term that allows them to continue the loan payments for a similar or longer period of time.  

9 Signs It’s Time to Refinance Student Loan Debt

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
Bride and Groom Figures Separating
2019-01-30
How Does Divorce Affect Student Loan Debt?

Lots of millennials are waiting longer to get married so that they’re more secure before tying the knot. The divorce rate dropped 18% in the last several years. Even so, divorce still happens. It doesn’t have to be the end of the world. Maybe your uncoupling is a fresh start, and separating your finances is the first step to setting up your new life.   As a millennial, many of us have student loan debt that is just part of our everyday reality. That’s true whether we’re married, single, or divorced. This is why so many people often will end up seeking out help and advice about student loans during the divorce process. Answers aren’t always clear, but we can help. There are a few things you should know to prevent any financial surprises.  

Can’t Divorce a Servicer

Student loan responsibilities after a divorce—particularly for Federal Loans—will be dependent on whose name is on the loan. If you and your ex-spouse agree on a payment arrangement that requires one of you to help pay, if it’s not in your name on the loan, that may not be enforced by the servicer. If your name is on the loan, you’re the one they’re going to pursue for payment.  That doesn’t mean you shouldn’t try to come to an agreement that works for both of you but stay on top of which of your loans are being paid. Make sure you never miss a payment even if your ex is supposed to be paying it.  

Repayment Amounts and Plans

With divorce, your family size changes, as does your household income. Changes to income and family size can mean changes to your monthly payment. Now it’s likely these changes will only happen if you are on an income-based repayment plan. It doesn’t mean that your monthly payment will go down, but your loan payment could go up or down. The payment amount will depend on what your spouse’s income was when compared to yours, so everyone’s situation is unique. Make sure to update the paperwork and stay current on your loans as you transition to paying your debts on your own.   If you’re having trouble making payments, look at different repayment options like an IBR plan so that you stay current on your loan payments and don’t fall behind. If at all possible, avoid deferment. Deferring your loans ensures that you don’t fall behind on payments, but the interest continues to accrue while you are not paying. This could extend the life of the loan and increase the amount that you owe, so it really should be a last resort.  

Credit Score

Some people think just filing for divorce will negatively affect credit, but that isn’t necessarily true. What can affect your credit is the process of changing your bills around. For example, putting things in solely your name that weren’t previously could affect your credit score. Making big financial changes like selling a house, refinancing, or restructuring debt can also have effects on your credit score. Some of those things could be good and some could lower your score, so it just depends on your situation. For example, adding on more debt without increasing your income could have a negative effect on your credit score.   If you are in the process of reassessing your financial situation on your own, you’ll want to review paperwork. Gather vital documents like your credit report and score. If you haven’t checked your credit report in a while, now is a great time too. Make sure there are no errors on your credit report and ensure that you know what your score is. You may be looking to make some changes that will certainly need a credit review. Changes could include looking for housing on your own, your own mortgage, changing the car you drive, or something else that will require a credit check. Don’t be caught off guard by not knowing what’s on your report right now.  

State Laws

The laws will either determine the debt as separate property or marital property. Now, separate property generally includes things like assists obtained before marriage like that of inheritance. Generally paraphrasing anything obtained by an individual before marriage is considered separate property. Anything that remains outside of separate property typically is marital property. Marital property is where the state laws really play a role.   Your remaining marital property will be divided based on if you are located in “community property” state or an “equitable distribution” state. During a divorce in a “community property” state, any marital property is split down the center at fifty-fifty. Most states tend to fall into the “equitable distribution” state law. The “equitable distribution” law says that each party has a legal claim to the asset or debt. The portion of value that is then divided to each party is determined by a number of different factors according to The Court.    

Cosigners and Private Loans

Private loans can be more complex. For instance, if your ex-spouse is a cosigner, then you are both responsible to pay the debt. If he or she was not your cosigner, the debt is the responsibility or you and your cosigner, if any.  

It might be a good time to refinance loans.

Whether you are just entering the divorce process or have already completed, see if now is the time to refinance. Get in touch to have one of our friendly advisors walk you through the process and give you information on how we can help.   Divorce can be one of the most stressful events a person will face, but empowering yourself with information will make it easier to navigate. Be sure to consult with a lawyer before you start divorce proceedings so that you can prepare. Do your best to work together to come to an agreement that helps you both afford to live on your own so everyone can move forward.  

Click for Requirements to Refinance Student Loans

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
Students On College Campus
2019-01-25
Don’t Wait for Graduation to Pay Down Student Loan Debt

What does a currently enrolled graduate student, a recent graduate, or a Doctorate student all have in common? The answer is simple, student loans. Sounds like a bad joke, but student debt in the United States is no joking matter. The current student loan debt total has hit $1.5 trillion as of 2018 according to Federal Reserve data. If you find yourself a borrower of student loan debt, know that debt doesn’t just start after graduation. The moment your loan is approved you become a borrower and therefore take on the responsibility to pay down that debt. As a borrower, here are some ways to be financially responsible and pay down debt quickly ensuring yourself a brighter financial future.  

Don’t Go Overboard

  According to CollegeBoard the average full-time bachelor degree seeking student, who attends a four year school will pay somewhere in the range of $21,370 to $48,510 per year in 2018 - 2019.  Now the average Master’s seeking student will pay about $19,080. These estimates do include the cost of room and board and will differ depending on if the student is attending an out of state school or an in-state school.   When the time comes to apply for your loans, be sure you have a budget! We cannot stress this point enough you need a financial plan before you make the decision to apply for student loans. Know what you’ll need to borrow money for. Think about tuition costs, housing, meals, book costs, personal costs, and transportation costs. Only borrow what you absolutely need for school.  

The Countdown

  Don’t be the student who has the countdown until graduation. You know, the one using the grace period to look for their future career and move back in with their parents. Now there’s nothing wrong with moving back in with the parents to save a few bucks, in fact, we would encourage it. What we mean is instead of waiting until the clock starts at the end of your grace period start paying down debt on day one! The sooner you can start throwing money at your student loans, the better off your future self will be.   Now it doesn’t have to be an astronomical amount of money. Even the smallest contribution towards your debt will help you in the long run. Let’s say that instead of going out to brunch with your friends on the weekend you decide to make it. Let’s say you usually buy an egg and cheese, on a bagel with a coffee for about $10 for simplicity. That $10 a week can turn up to $40 a month.   Say you took out $30,000 in student loan debt. If you completed a $40 payment every month while you’re in school, you would save $2,515 from the total of your loan. Yes, you can drop almost $3,000 off your loan by simply making a $40 a month payment. Small sacrifices make all the difference in paying down your student loans before graduation.  

It’s No Vacation

College in the past was seen as an experience but it is not any longer. Don’t treat your education like a vacation with a limitless budget. According to the Bureau of Labor Statistics, the annual American household cost for eating out is $3,000. Even if it’s only one person, that would count as a household. Broken down that would be $250 a month the average household spends eating out! Before you start spending money on food remember that’s money that could go towards your student loan debt. We all have to eat to live, but is eating out necessary? Try using that meal plan or doing weekly grocery shopping and meal prep.  

Stay in Budget

Someone once said “Just because you can, doesn’t mean you should” that could not be truer here. Though you may have money for streaming services like a Spotify Premium® membership or Netflix® – doesn’t mean you should have it. In addition to cutting down on eating out, you could lose that Netflix® account. About nine out of ten college students use Netflix® according to Daily to Reader. If you’re living on campus you’re provided with free cable. Yes, the keyword being “FREE” - drop the subscription services and put them towards student loan debt. No, you won’t be able to watch the latest series of Stranger Things on your own, but I’m sure your friend or their friend has Netflix®. The Basic plan on Netflix® as of 10/2018 is $7.99 a month. Let’s take your savings from cutting back on eating out including our previous example- $100 and savings from losing that Netflix® subscription $7.99 that equates to 107.99 a month towards student loan debt. When you pay $107.99 every month towards your loan it is a savings of $7,083.71 from the total loan amount.  

They’re Called Doctors

  If you’ve ever seen the movie Tommy Boy you’ll get the reference. If not, you can watch the clip online. Going to school for seven years is for doctors, not the average student seeking a bachelor degree. All jokes aside, you need to do your best to graduate on time. Staying in school longer means more debt and that means more money you’ll need to pay off in the long run.   In recent years there has been a trend of typical 4-year degrees taking 6 years to achieve. Students who take longer to graduate are spending 50% more than participated for their degrees according to Student Debt Relief. One major tip (no pun intended) know what you want to major in before starting. It’s okay to change your major but work closely with counselors take summer classes. Do your best to stay on track for your estimated graduation date.  

Evaluate Loans

Yes, you finally graduated! Don’t be fooled the work doesn’t stop. To continue being a financially responsible borrower you’ll need to evaluate the types of loans that you have. Do you have federal or private loans? The type of loans that you have will have major implications on the options that you available to you moving forward.  Pay attention to your interest rates and knowledgeable regarding repayment types.   Be wise; if you are within that 6 month grace period, continue to make those payments because we know that they will pay for themselves and then some. Create a long-term plan to pay down your debt. Use your income to create the long-term plan and stick with your budget. There are so many resources available at your fingertips to research things like loan consolidation, student loan refinancing, student loan forgiveness, and deferment and forbearance.   Your responsibility for staying a responsible borrower is to continue those healthy spending habits that you created for yourself in college. In addition you should look to further your education. Do you want to get a Master’s Degree? Use reliable sources and stick to a budget and long-term plan. Education is so no joke. Whether you’re the currently enrolled graduate student, a recent graduate or a Doctorate student debt doesn’t have to weight you down forever.  

Learn More About Grace Periods

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.