What You Need to Know About Student Loan Debts

According to an article published by MarketWatch, the outstanding student debt in the United States is the second highest consumer debt behind home mortgages. The article goes on to say that the total loan debt (most of which are government loans) is $1.2 trillion.

Over the past decade, there has been a perfect storm of circumstances that have converged to make student debt a national issue. The recession saw many individuals who were unable to get jobs going back to school in an effort to make themselves more marketable. The recession also played a part in a shrinking American income, making it more difficult for students to pay for tuition out-of-pocket. Skyrocketing medical costs (up 601%) and food prices (up 244%) also play a part in the financial pinch.

Another factor playing into the student loan crisis is the growing cost of education. According to Bloomberg the cost of college has increased 1,120% since 1978 when records started being kept. According to JPMorgan, the current average annual cost to attend college is $42,419 for private universities and $16,943 for public schools (tuition, fees and room and board). If tuition increases continue at the current pace, by 2033, a private college could cost upwards of $102,000 per year with public schools over $45,000. To put that in perspective, for a child born today, the cost of higher education at a private school could skyrocket to $440,000 and a public education to $185,000, by the time they graduate from high school.

College graduates of the class of 2015 were given the dubious distinction of the having the largest student loan debt on record. The average debt was estimated at over $35,000. So what options are out there for these graduates? What is the next step in the journey to repay their loans? While the plan isn’t perfect, the government is coming up with options to help students shoulder the burden. In addition to simply setting up a repayment schedule with your loan provider and sticking to it, a recent article by the Huffington Post provided these additional resources:

  • Direct, Perkins, and FFEL Loan Discharge – While approval of this option is very rare, in some unique cases, a federal student loan borrower can be relieved of making further payments on their Direct, Perkins, or Federal Family Education (FFEL) Loans. Some circumstances that might be considered valid include disabilities, closed school, death or even proof of fraud.
  • Perkins Loan Cancellation – This loan cancellation is also not easy to obtain, but can be an option for individuals in specific fields of employment (teachers, nurses, non-profit, military, etc.) See this chart for a full list of the Perkins loan cancellation provisions.
  • Teacher Loan Forgiveness – Individuals in the career of teaching with Direct and/or FFEL loans after October 1, 1998 are also eligible for loan forgiveness if they meet certain qualifications. Click here for more information on Teacher Loan Forgiveness.
  • Public Service Loan Forgiveness – Another valid loan forgiveness option for qualified individuals in public service jobs is the Public Service Loan Forgiveness program. Read more about this program here.
  • Income-Driven Repayment Plan Forgiveness – This program is for individuals who have made reduced monthly payments (tied to income level) up to 25 years. Upon making regular payments, any remaining loan balance could be forgiven. Eligibility requirements for this program can be found here.

The student debt crisis is not one that will go away any time soon; however, steps are being made to help individuals who are struggling. The important thing for both recent college graduates and collection agencies is to know the options and be diligent in proper communication and documentation to handle any unresolved debts in a timely manner.