The number of students who graduate from college saddled with significant debt is growing, and the process of repaying loans can be contentious for all involved. (ABC News)
According to the Federal Reserve Board of New York there are approximately thirty-seven million student loan borrowers with outstanding student loans today.
Student loan debt has been increasing at a rapid pace in the last decade, climbing from about $364 billion in the first quarter of 2005 to $904 billion in the first quarter of 2012, a rate of 13.9 percent annually (compounded). Along with this increase in debt has been an increase in default rates. High debt levels, coupled with high default rates, present a number of challenges for individual student loan borrowers. (The Federal Reserve Bank of Kansas City)
With the student loan debt increasing so quickly it is more important now than ever for college students to make and stick to a budget. Having a budget will help the student remain aware of what is owed and will also help to keep them accountable for the allocations of their money. Many college students do not make a lot of money to begin with, and throwing it away partying every weekend is only going to increase the weight on their shoulders once they have graduated.
The statistics show that the debt accumulated in college is actually following many students far out of college and into their future. It is not as easy now as it used to be to get the student loan debts paid off. As mentioned above the default rates for these student loans are being increased as well. So if the loan does not get paid off in the timeframe that was given then it is going to be even more difficult and costly to get it paid off in the future.
The best thing students can do is to take steps to avoid the debt altogether.
For the students who have not yet taken out a loan, or even the ones who are not yet in college, start saving now! By kick starting the saving it will be easier to get college paid off ahead of time. Even if you are only able to save enough to pay for one semester at a time it will still be more beneficial to you in the long run if you are able to pay for the majority of your classes yourself.
Don’t take on too much. Working and going to school can take a toll on a person, especially if that person is working more than part time. More often than not students feel that they need to take as many classes as possible per semester so that they can get them out of the way. However, financially less may be more. By taking fewer classes at a time it will be less money that has to be spent. It may not get you in and out of the college at the rate that you were hoping for, but at least your first paycheck after graduation will be yours and not the student loans.
Get the scholarships! There are so many scholarships out there that are just waiting to be given away. Students often forget about them, or don’t want to spend the time writing the essay that the scholarship requires, but in the long run these scholarships can help so much. This is totally free money. Scholarships never have to be paid back and there are so many websites with lists and lists of scholarships that it is nearly a guarantee the student will be able to receive money from at least one of them.
See if you qualify for a grant. Like scholarships, grants do not have to be paid back. However, instead of submitting an essay or answering a few questions to receive one, grants are given to those who have a financial need.
The best way to avoid the accumulation of student debt is to just completely avoid student loans altogether. If that just isn’t a possibility for you and you absolutely must get a loan then don’t overdo it. Only borrow the amount of money that you will need to pay for your classes and books; don’t borrow thousands extra because that will just make it that much harder for you to pay off in the future.