What Options Are Available with Student Loans?
Student loans remain a big concern for high school students, college students, and graduate students. They become an even bigger concern when the loans need to be repaid. In the US, household debt continues to rise unabated. In Q1 2017, the outstanding balance on household debt increased for the 11th consecutive quarter, as it topped out at $12.73 trillion, up 1.2% from Q4 2016. Compared to 2013, household debt has advanced by 14.1%.
What is even more alarming is that the total debt level at the peak of the global financial crisis in 2008 was $12.68 trillion, and now it has exceeded that and is growing vast. The rising importance of student loan debt as a component of overall household debt is growing. Consider that in Q1 2017, student loan balances added an additional $34 billion in debt.
Current State of Student Loans
A report from August indicates that Americans now owe more than $1.4 trillion in student loan debt, with some 44 million borrowers across the country. This statistic is alarming, given that the total value of credit card debt in the US is significantly less than that. According to the figures, the average student loan debt for a 2016 graduate was $37,172, up 6 percentage points from 2016.
Student loan delinquency rates are rising, now at 11.2% for students who have not paid their debts for 90 days or more. This indicates that an increasing number of students are defaulting on their debt, because they simply cannot afford to make these repayments. The average repayment amount on student loans is $203 per month, a substantial figure for recent graduates to repay.
Student loan debt is broken up into different types of loan programs, notably the following (as at the end of Q2 2017):
- Perkins Loans account for $7.9 billion with some 2.6 million borrowers
- FFEL loans account for $320.5 billion with some 15.7 million borrowers
- Direct Loans account for the lion share of student loan debt at $1,003.3 billion with some 32.1 million borrowers
Workable Solutions for Student Loans
Whether you’re a high school student, a recent graduate, or a young adult looking to attend college, you will want to know about all your options when it comes to student financial aid. Several popular options are available, including federal government grants to help you pay for your tertiary education. One such option which has gained traction with students around the US is the FAFSA option – Free Application for Student Aid. This application is designed to assess your eligibility for student aid.
There are many different types of student loans currently available to students. With FAFSA, your income level does not factor into the equation. First of all, it is 100% free to apply for FAFSA, and this should be done through the official portal. In fact, the majority of colleges across the United States use these applications to choose students for non-federal student aid.
You get to access a low interest rate loan and this will actually help you to establish a solid credit history, and boost your credit profile. With FAFSA applications, college admissions officers will understand that you are serious about your studies and this could bode well for your eligibility for admission. The entire process can typically be completed within half an hour.
Students who complete their applications earlier than October 1 will not stand a better chance of receiving loans earlier, but it’s certainly preferable to have everything lined up well in advance. According to the terms and conditions of FAFSA applications, it is now necessary to submit 2 years’ worth of tax returns, not one as was required previously.
There are numerous benefits to these types of loans:
For starters, no payments are due until you have graduated from school, or you have attended less than 50% of the time. There are also no prepayment penalties on these loans, and if you work in public service, a portion of the loans can be forgiven. The FAFSA loan interest rate is fixed at a lower rate than private loans, and certainly less than what you would be paying on credit cards. The total annual value of federal student aid with FAFSA loans exceeds $150 billion, making this one of the biggest public disbursements for education in the world
