Average student debt loads have continued to rise. For many, college has been a lifeline and most college-going young adults struggle to keep their heads above water financially. Student debt has taken on a new significance as the average American struggles to survive the current economy. With college costs steadily rising, more students are finding themselves overwhelmed by debt. More importantly, with more students facing unprecedented levels of debt, many institutions of higher education have been forced to implement financial aid plans that were not necessarily in place several years ago.
The number of student loan debts in deferment and default decreased, while the number of student loan debts in forbearance grew over the last five years. In absolute terms, the number of borrowers seeking to defer or in default of their student loans actually decreased slightly from last year to this year. From a national perspective, however, student loan debts are at an all time high. At least when you consider the number of students who dropped out of college because of financial hardship, the average student loan debt per graduate has actually increased during the past five years.
Loan debt affects both the graduate and the undergraduate borrower. For the graduate, loan debt can significantly affect their future ability to secure employment and can greatly impact their credit rating. For the undergraduate borrower, loan debt can also affect their financing for post-graduation living expenses as well as financing their education as an adult. There are many government programs that have been set up to help students deal with the difficulties associated with rising student loan debts.
When it comes to the average student debt, the amount owed by the undergraduate borrower has actually dropped since 2021. This is primarily due to the fact that the cost of tuition at public colleges has increased dramatically over the past ten years. Since 2021, there has been an average decrease in the average amount owed on student loans. In addition, the average student borrower’s monthly income has not increased at the same time. These two factors combined have resulted in lower average student loan debts.
Graduate borrowers face a different set of factors when they are trying to plan for their post-graduation future. First, the average amount owed on most graduate student loans is significantly lower than the average amount owed on the average undergraduate loan. This means that graduate students will not be able to consolidate federal loans or take advantage of federal income-based loans such as the Pell Grant. As a result, graduate students will have to take out unsubsidized student loans to pay for school. Although these unsubsidized loans will carry a higher interest rate than subsidized loans, the graduate student will be required to make good faith payment until they finish their degree and become eligible for refinance.
Most graduates want to start making payments toward their student loans as early as possible. Unfortunately, waiting until six months after graduation will almost guarantee that the average amount due will increase. For most students, this would mean six more months of average student loan debt. Although many graduates attempt to pay off their loans early, they usually do not get the lowest possible interest rates. It is very important that graduates begin their payments early to get the best possible interest rates. Remember, the six-month rule applies to student loans only; loans taken out by parents are not considered as a part of the graduate student’s loan consolidation portfolio.
Two other factors play a role in determining the average student loan debt for graduates. First, the amount of the loan and the starting salary are much larger factors than most borrowers realize. The starting salary of $30k may not seem like a huge amount, but if a graduate has to pay off five or six hundred dollars in student loans before they can settle their first official job, the starting salary will go up considerably. If the starting salary is too low, most graduates will opt to take a short term job that pays close to or just over the required starting salary. This short term employment will help to keep the borrower from having to pay a huge amount off of their debt.
Average student debt amounts may seem overwhelming when it is compared with graduation gifts that graduates typically receive. However, a gift will be useless if a graduate does not know how to spend it. Graduates need to be aware that the amount that they are awarded will not always be enough to live on after graduation. Because of this, many graduates have a plan for their money so that after graduation, they are able to start living life the way that they want to. Students who are properly prepared for their debt after graduation will be able to use it in the best way possible. Being debt free after graduating will allow graduates to focus on getting good jobs and living life on their own.