Spring Semester starts this week at many universities and with it brings another increase in student loan debt. American students are taking on debt at an alarming pace, bringing the average balance to about $29,400.
Keep in mind that this is the average amount of debt for those with a student loan balance. Someone almost finished paying off their loans is in a much different financial position than an individual with $140,000 in student loan debt who will be graduating in May.
The fact that the U.S. set a new record for student loan debt on Dec. 31, 2016 should no longer be shocking since we have been setting new records every 90 days since the beginning of 2004. This means that, as a nation, we are not repaying our debt at a sustainable rate.
In a way, some of our students are being saddled with what essentially equals a mortgage payment 6 months after they graduate college. Of course, this comes without the associated luxury of a roof over their heads in exchange for the payment. Unlike a mortgage payment, a student loan can rarely be discharged in a bankruptcy, meaning you cannot walk away from it.
While there are some repayment plans that can help with Federal student loans, they will all likely end up costing you more in interest over the life of the loan than the standard plan. At the same time, at least you will be able to stay current and not go into default if you are not working or have too little income to spare for your loan payments.
Private lenders are a completely different beast and there may be little recourse if you cannot make your minimum monthly payments.
Sources: newyorkfed.org, studentloans.gov