According to a recent article by MoneyWatch, almost 20% of American families have a student debt load. This is up a great deal from twenty years ago, when just over 10% of families were forced to take student loans. What is causing this difference and how does it affect you?
Reasons for the Debt Problem
There are many reasons why more students are being forced to take out student loans. First, there have been significant tuition increases among all colleges and universities over the past couple of decades. This increased cost coupled with government cuts to grants and other financial aid is creating a tremendous debt burden on new graduates. In addition, the faltering economy has made it impossible for many families to pay for their children’s college educations.
Why It Is an Issue
While nobody likes being in debt, the major reason why this rise in student loan debt is alarming is that many people are having great difficulty repaying the loans. Some are unable to find jobs after graduation, some are finding themselves underemployed, and still others are finding excellent employment but are finding that the cost of living is eating up a great deal of their salary. Because of these factors, many people are finding it difficult, if not impossible, to pay off their student loans. In fact, the Institute for Higher Education Policy has stated that 40% of people with student loans are delinquent on payments during the first five years of the repayment plan.
What You Can Do
Because it is getting harder to repay student loans, it is more important than ever to borrow wisely. First, explore all opportunities for scholarship and grant funding, which does not have to be repaid. Next, maximize Stafford Loans. These federal loans make them much safer for students to borrow and offer excellent interest rates and repayment options. If you still find yourself needing funds, try to find a part-time job and cut your living expenses as much as possible. Use private student loans only as a last resort, and only borrow the minimum amount needed. This will help safeguard your financial future after graduation while still allowing you to earn the degree you need.