As per recent reports, the student loan debt of the nation has tremendously expanded since the last decade. As more and more individuals are attending college these days, there’s also a constant demand for student loans. For the batch of 2015, the average amount of debt on student loans was over $35,000 as per government data. In fact, the Federal Reserve said that during March, 2015, the outstanding US student loan debt stood there at $1.30 trillion and this figure is predicted to grow in 2016 and onwards. The current graduates who are leaving schools are simply saddled with their student loan debt and these obligations are preventing them from saving for their individual retirements and they are also bound to postpone their home buying and marriage plans.
Unfortunately, the college costs keep soaring every year and gradually it is surging out of control. Data from JP Morgan says that college tuition is the one of the fastest increasing household expense for every family and the total cost of attending a private or a public college will gradually increase by 2033. It might cost you around $43,514 to attend a private college and around $17,987 to attend any such private educational institution. You will be rather surprised to know that the price tag of attending a private college will move up to $102,097 for public universities. In fact, a newborn baby might expect to pay at least $450,000 for a private college by the time he/she attends one.
Important facts on student loans which college grads should be aware of
The main thing that you need to learn about student loans is to check whether the loans are private or federal and before they know this, they shouldn’t seek such loans. If you’re about to attend a college or if you’re a parent whose kid is going to go to the college, here are some vital student loan facts that you need to know. Check them out.
- Know about the provider of the loan: Did you know that you can log in to the National Student Loan Data System and find out information about your specific service provider and about the details of your loan. As per what student loan experts say, it is vital to update any kind of small changes like the email address or street with a student loan servicer and you also need to communicate some other changes to your financial situation.
- Check whether the loan has grace period: Majority of the student loans have a grace period. For example, the Stafford loan offers borrowers with a 6-month grace period before even the first payment is due. Borrowers who have Perkins loans are given even a longer grace period of about 9 months. In fact, there are many private educational loans too like the Wells Fargo student loans which offer grace periods. Before you take out any kind of loan, ensure it has a grace period.
- Take some steps during unemployment: The federal student loan borrowers who are unemployed might enroll themselves in some income-driven plan which reduces their loan instalments with payments as less as 0 dollars. However, that doesn’t mean that the borrowers are eligible for such low payments but enrolling them within a plan is definitely better than the forbearance option.
- Defer your loan when you’re studying: If you’re a borrower who has taken out federal loans and you’re entering an advanced degree or some fellowship programme, you may choose to defer on the student loans. If you don’t know what it is, then it will allow you to not make payments during a fixed period of time. Depending on the kind of loan, the federal government might also pay the interest on the loan during the phase of deferment. However, the interest rates will keep accumulating.
- Avoid having delinquent student loans: As per reports from the US Department of Education, around 1 among 4 students defaults on the loans. Among them 70% could have qualified for an income-based repayment plan if they had asked for it. Experts advise students not to default on their student loan payments as there so many income-driven payment plans designed for them. You should rather talk to your lender so that they can allow you to make repayments on the basis of your income and avoid hurting your credit score.
Attending college is an amazing experience for most students as they get the chance to taste financial freedom. But if you’re open minded enough and you know how to manage your finances, it is only then that you can tackle your money during this phase. Take into account the important details mentioned above and think twice before taking out student loans.