They are truly frightening, and they are coming for you.
Yes, it's student loans.
Here is the scary reality today:
- 7 in 10 students graduate in debt
- The average debt is over $30,000 per borrower
- The average monthly payment is over $300
- 20% of students have to take out private loans
- The higher your education level, the more debt you have
- the total number of student loan borrowers in default has grown every year and has reached 8.1 million people.
The Good and Not-So-Good News
Although the total amount of borrowers in default has grown, the rate at which new borrowers enter default has declined.
This is likely due to more flexible student loan payments offered, including income-driven repayment plans.
In 2015, 4.6 million borrowers were enrolled in income-driven repayment plans. This was a 48% increase from 2014.
While an income-driven plan is better for the student than defaulting, there are downsides to these plans. For one, students who choose an income-driven repayment plan will end up paying much more in interest than they had originally anticipated.
But the real problem with income-driven repayment plans is they are just not a solution to the real problem: the rising cost of college tuition.
Actually, there is evidence to suggest that easy access to student loans is one of the causes of rising tuition, and easy efforts to pay it back (with colleges having no "skin-in-the-game" when it comes to outcomes) will just make this problem worse.
So, What do I Do?
The more you know about this issue, the better education decisions you will be able to make.
Study for yourself the reality of student loans, interest rates, and the job market for your particular major. Choose a major and a college that is a good fit for you that makes sense financially.
Debt is a tool, but it can be misused.
Most advisors recommend that your total student loan debt at the time of graduation should not exceed one year's salary in your preferred career.
For many students, this means loans exceeding $35,000 will be difficult if not impossible to pay off in a timely fashion.
Education is important, but you can receive a good education in a lot of different places, and in a lot of different formats. That’s why we encourage you to forgo one-size-fits-all rankings, and prioritize fit over brand name.
Better access to relevant data is the fastest and most sure way to begin changing the higher education industry. You'll be able to see if that expensive private college is living up to its claims by examining graduation rates, average salaries of graduates, and average debt of students among other factors.
Want to see for yourself?