What is the Student Debt Crisis & How Can You Get Out of It?
December 23, 2019
Today, in the United States, debt accumulated from students perusing higher education degrees accounts for over $1 trillion of the nation’s debt. In February of 2017, the Federal Reserve Bank of New York stated: “student loan debt rose for the 18th consecutive year and borrowing has doubled in just eight years.” Debt.org further illustrates this point by breaking down the $1 trillion figure into debt accrued every second–– which today, is $2,858.
With figures this staggering, it’s hard to imagine how students in the U.S. landed in such a predicament. Today, we hope to illustrate the beginnings of this monetary malady, give tips for how you can get out if you’re stuck in debt, and how to avoid joining in with the millions of Americans troubled by their student debt.
How did the student debt crisis begin?
An article by The Balance observed the rising costs of tuition, fees, room, and board and attributes the beginnings of the debt crisis to this. The increased cost of attendance led to more students and families taking out larger and larger loans to accommodate these fees. Couple this with defaulted/delinquent payments and the loan figure rapidly increases because of interest rates. New York Fedloan found “10.7% of aggregate debt was 90 or more days delinquent or in default at the end of the first quarter”.
What can you do to relieve your debt troubles?
Paying down student loan debt can prove to be a difficult task so we’ve accumulated a few different ways you can strategize making payments or increase your income to make this feat a little less challenging.
- Consolidate your debt – Debt consolidation is a way to wrap up all of your debts into one, unified payment with a lower interest rate. This can help reduce your final pay off amount and may even help you pay off your debt quicker because of this.
- Student Loan Forgiveness – Student loan debt forgiveness is a federal system designed to help people who persue work in the public sector. At a high level, graduates with federal debt enter an agreement with the government that they will work an agreed-upon time and make agreed-upon payments on their loan. Following the completion of these terms, the government will forgive the graduate’s agreed-upon federal loans.
- Pay above the maximum – Any money you pay above your minimum payment can help you bring down your debt and avoid paying more interest. In the long run, this strategy can help you pay off your debt faster, too. Paying whatever amount extra every month might make your personal finance a little bit tighter but could help you reach financial freedom sooner.
- Pick up a side hustle – With debt and personal finances, sometimes getting ahead is a matter of minimizing your spending and sometimes, it’s a matter of making more money––or both! If you’re in need of more money, consider taking a look at our tips to maximizing your income with side hustles.
How to avoid joining the debt crisis
If you haven’t yet started your higher education journey, and you’re feeling a little wary of joining other Americans in the debt crisis, luckily, you’re already ahead simply by thinking about this. You can avoid student loans with careful planning that considers where you are financially right now, during your college years, and the period following this.
Some solutions to avoiding student debt include saving money, acquiring scholarships, and seeking out grants you might qualify for. The more diligent you are about your finances, the better you can prepare yourself for what life may bring your way financially. And doing this is a fantastic way to stay empowered financially as you seek out your education.
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