The Student Loan Crisis Is Worse Than You Think

The student loan crisis is worse than you think.

Here’s what you need to know.

Student Loans

A new report from the Bipartisan Policy Center, a Washington, DC think tank, shows why student loan debt has increased 144% since 2007. Today, according to the latest student loan debt statistics, there are 45 million student loan borrowers who together owe $ 1.7 trillion in student loans. Without reform, student loan borrowers and their families will continue to be burdened with student loan debt, and the federal government will be financially liable if student loan borrowers default on their student loans.

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Here’s why the student loan crisis is worse than you think, what it means for your student loans, and what you can do about it.


Student Loans: 4 Drivers of Student Loan Debt

According to the report, there were 4 main drivers of student loan debt growth:

1. Improved access to student loans

Improved access to student loans is a double-edged sword. Easy access to federal student loans means more people can go to college and live the American dream. At the same time, colleges and universities have increased tuition fees knowing that everyone will pay higher costs to get access to higher education. Put simply, consumers are less price sensitive to tuition increases when there is money to go to school. However, the federal government does not draw out student loans like a private lender. This means that regardless of the underlying credit profile, every student loan borrower will receive the same interest rate. Borrowers with higher creditworthiness can “overpay” their student loans, while borrowers with lower creditworthiness can “underpay” their student loans. This can lead to undesirable results for both the borrower and the federal government if the borrower defaults on their student loans – and the default risk interest rate has not been adequately assessed. Federal student loans are not limited by the ability to repay student loans. (Here’s how to get a student loan waived even if you don’t work in the public sector).

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2. Less government funding for higher education

Government funding for higher education has declined. With many states facing budget cuts and falling tax revenues, the states have not been able to offset the rising tuition, room and board levels at many state colleges and universities. There was also a “relatively declining value” of Pell Grants. As a result, students are more reliant on government student loans and private loans to fund their education. (Here’s how to get a student loan waiver).


3. PLUS loans are too easy to come by

Parent PLUS loans and Graduate PLUS loans are too easy to come by, according to the authors. Parent PLUS loans that a parent can take out to pay for a child’s schooling are limited only by the cost of the school. Again, PLUS loans are not based on the ability to repay the student loans. Parent PLUS loans, which parents often take out when they near retirement age, have the highest interest rate of any federal student loan, which can make their repayment prohibitive. (3 Ways to Get Lower Student Loan Payment).


4. Not all colleges and universities should have access to student loans

Poor quality colleges and universities, like certain underperforming universities, still have access to federal student loans. This can be despite the fact that students are not being provided with high quality education. If student loan borrowers at these schools cannot repay student loans, the federal government bears the financial costs. The authors call for more institutional accountability. (Here’s who’s just qualifying for student loan remission).

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What that means for your student loan

It’s helpful to understand what caused student loans to skyrocket over the past 20 years. What does this mean for your student loans? If you are considering a student loan as a student or parent, first make sure you know the total cost of the loan (including compound interest) and weigh it against your ability to repay. This is not easy sometimes as it is difficult to predict future earnings. (How to Apply for Limited Student Loan Waiver). However, make sure you understand the monthly payments. Second, make sure that the school you attend offers the high quality education that you have come to expect. You don’t want to take out student loans to find out that your school is an underperformer. Therefore, find out more about your school and carry out due diligence, such as B. Employment statistics, graduation rates, and other information to help you make informed decisions. Third, don’t borrow more than you need. You may find a comparable degree or program at a cheaper school that offers a better financial support package. Do not choose a school based on ranking; Also take into account the financial assistance and all of your borrowing for the student loan.


Biden helps borrowers with student loans

President Joe Biden recognizes the threat of growing student loan debt. As president, Biden canceled $ 11.5 billion in student loans. This week, US Secretary of Education Miguel Cardona announced that $ 2 billion in student loans would be canceled within a matter of weeks. Biden understands the main drivers of student loan debt growth, including, according to the report, that the rise in tuition fees has overtaken the rise in access to financial aid. To address this, Biden has pushed for a historic expansion of Pell Grants. The Department of Education is also making student loan service providers and for-profit schools more accountable for the results. As the authors note, there is unrestricted access to federal student loans, which can lead to increased defaults. At the same time, the uptake of additional student loans is encouraged, while some student loan repayment plans reward higher earners with large student loan balances, which can lead to a regressive system. Biden is focused on making student loan repayments easier, canceling $ 4.5 billion in student loans for public officials, and increasing targeted student loan cancellation for more student loan borrowers in the near future.

If you have student loans, you should know that temporary student loan relief ends on January 31, 2022. Regular student loan payments for federal loans begin the next day. This means that today, too, you need to evaluate your student loans and come up with a clear strategy for repaying the student loan. Here are some popular options for paying off student loans:

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Student Loans: Related Literature

How to get a student loan issued

How to apply for the student loan term

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Here’s who is currently eligible for student loan waiver

3 Ways to Get Lower Student Loan Payment

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