The Washington Post recently reported that Americans now owe more on their student loans than on their credit cards or car loans. That’s based on a March, 2012 report from the Federal Reserve Bank of New York.
In fact, student loan debt is on the rise while other kinds of debt are leveling out or even falling. According to the report, student loan debt stands at $870 billion nationally. That’s $140 billion more than the nation’s outstanding balance on auto loans and $177 billion more than what we all collectively owe on credit cards.
So while we all thought the temptation of credit cards on campus was the big problem, it’s really going to college in the first place.
Another alarming aspect of the student loan debt issue is that most of that debt is held by people older than 30 (with one third of the debt holders older than 39), indicating that very few students manage to pay off their school debts before middle age hits. That’s scary news for any undergrad, especially when jobs are hard to come by.
How Undergrads (and Grads) Can Stay Out of Debt Trouble
In the fall of 2011, President Obama took executive action to cap monthly loan payments at 10 percent of discretionary income. That will certainly help grads who are struggling to make their payments each month. The President also challenged colleges to lower costs for students so they wouldn’t have to take out so many loans in the first place.
But what else can college hopefuls, undergrads, and graduates do to avoid the student loan debt trap? Well, those just starting out in school can look into scholarships, of course. Incoming students will also have to be a little more pragmatic about how much school costs and if their career choices will be lucrative enough to make the loans manageable.
Undergrads already strapped with loans should really focus on not incurring any other debts. That means staying away from credit card temptations and learning to keep tabs on spending.
And the graduates? Look into other repayment options, such as Income-Based Repayment and Public Service Loan Forgiveness. If you’re tempted to pay off your student loans with a credit card, put down the plastic and back away. No matter how many reward points you might earn, it’s usually not worth it in the long run unless you score a really amazing interest rate AND have a solid, fast-track payment plan ready to go.
SOURCES:
http://www.washingtonpost.com/blogs/college-inc/post/student-loans-surpass-auto-credit-card-debt/2012/03/06/gIQARFQnuR_blog.html
http://www.chicagotribune.com/news/sns-201203071049usnewsusnwr201203060306studentmar07,0,5970675.story
http://blogs.du.edu/today/news/college-students-should-careful-with-credit-cards
http://www.usnews.com/education/blogs/student-loan-ranger/2011/12/21/think-twice-before-using-credit-cards-to-repay-student-loans
PHOTO CREDIT:
http://thecollegeinvestor.com/578/ways-to-get-student-loan-forgiveness/
