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One study shows that Student loan borrowers are central to financing a college education, yet millions of borrowers are in default. (Dynarski par. 1). (into) This quote states the default issue for student loan borrowers, however, we can solve this crisis. In addition, solutions to student loan debt include following a payment plan, being educated about loans, living on a budget, finding jobs that offer forgiveness, and lastly saving money. Consequently, failing to repay student loans can ruin future choices such as buying a car or house due to a bad credit report. Nevertheless, those kinds of situations can be preventable.
One solution, to avoid the student loan crisis is to follow a payment plan. (inter) According to the New York Times, How To Clean Up The Student Loan Mess, Susan Dynarski points out that we could make it easier for borrowers to manage the loan system. She explains, that when borrowers fall back on their payments, they should be automatically enrolled in an income-based program (par. 11). Furthermore, Dynaski reports, that enrolling in an income-based repayment program simply cuts down the loan default from 21 percentage points to considerably zero points (par. 7). Similarly, all income-based plans offer to reduce monthly payments due to low income. Alternatively, if the borrower happens to experience financial calamity or unemployment, the borrower can apply for deferment. As a result, this allows borrowers to postpone payments for up to three years. Also, the borrowers can explore cost-reduction alternatives by taking advanced classes in high school, and earning those advanced credits can reduce college expenses (Johnson et al 195). However, this allows the borrower to graduate sooner which saves the borrower money. In addition, another online resource that can be helpful to students may be the Federal Student Loan Estimator, which allows the student to calculate payments.
Another solution is to be educated about student loans. According to the article, The Right Way To Borrow For College Sandra Block suggests discovering loans with advantageous terms and reducing the act of borrowing money (par. 2). For instance, being educated about loans has many advantages. Such as being eligible for repayment plans and getting debt forgiven. In addition, choosing federal government loans first allows borrowers student loans to be discharged if the borrower passes on (Block par. 3). Alternatively, Perkins Loans allows undergraduates to receive up to $5,000 per year for a maximum of $27,000, also borrowers get a nine-month period to repay and have up to 10 years to pay them off after graduating or leaving school (Block par. 5). Similarly to Perkins Loans, Direct Subsidized Loans also includes borrowers interest being paid for by the government while in school (Block par. 8). In contrast, Direct Unsubsidized Loans does not include government paying interest while in school (Block par. 9). Furthermore, A previous study (Andruska et al., 2014) states the lack of knowledge about different types of loans and options for college, many students stated they did not question what loans they were getting or even asked about other types of loans. Another student stated they knew nothing about student loans and would be graduating with a lot of debt. Also, the student knew of subsidized and unsubsidized, but could not be able to explain if the student was asked what it was. (Johnson et al. 191). Alternatively, students rely on their parents, and their decisions are influenced by them. Furthermore, one student stated that she just signed the loan contract because she trusted her parents and did not educate herself about loans. (Johnson et al. 191). Also, many students feel obligated to choose careers that are chosen by their parents. As a result, the student ends up switching careers and starting all over. Consequently, this can result in more debt and a waste of money (Johnson et al. 185). Furthermore, educators and financial aid advisors can be helpful to students by giving them alternatives and helping them choose what loan best suits the borrowers (Johnson et al. 194).
One of the best solutions is to live on a budget. For example, according to the article, Navigating The Student Loan Mess Anne Smith argues that millennials prefer to pay monthly bills for gym memberships or cable services but would not save up for college (par. 6). This attitude shows students need to live on a budget and prioritize college. Furthermore, living the college lifestyle benefits the borrower in a lot of ways, Such as borrowing as little as possible. As a result, this allows the borrower to repay on time due to money being affordable. One way to budget is to explain in the article, Navigating The Student Loan Mess, written by Anne Smith, who states keeping track of all finances on a dashboard, helps the borrower to track their progress (par. 4). Therefore, students knowing how much they owe can help them keep track of how their monthly payments.
In the meantime, students can find jobs that pay some percentage of debt or offer forgiveness. Besides, borrowers who worked 10 years for the government or a nonprofit may qualify for debt forgiveness (Block par. 17). More importantly, pay as you earn that way you qualify for debt forgiveness faster. Also under any circumstance, federal loans qualify for forgiveness. Similarly, working full-time public service with Perkins loans can get debt forgiven fully (Block par. 5). In addition, most forgiveness programs do not have the same requirements or conditions make sure to research the forgiveness program before pursuing. Furthermore, According to USA Today, full-time undergraduate employees can receive up to $3,000 each year and up to $5,250 for graduate courses. Also, workers who work at Walmart or Sams Club and who studied at American Public University may be eligible to receive a grant that covers 15% (Shawn par. 2) Similarly, Chipotle employees receive up to $5, 250 per year for educational expenses (Shawn par. 3) Also, the company offers programs and degrees from many universities in partnership with Guild education. However, in most cases, students need to be employed for a certain period with their company to receive tuition and must maintain average grade points (Shawn par. 3)
Lastly, students could put away money towards student loans. As soon as borrowers start saving from early adulthood, they can save up to six figures worth of wealth. (Johnson et al. 195). Alternatively, students can use money from savings if they do not qualify for loans. Also, students should avoid using student loan money for non-school-related expenses. While that might be the only option they have. As a result compound interest works against them when debt is overdue (Johnson et al. 195). In addition, several students mentioned until their student loans are repaid, they may be unable to save (Johnson et al. 195). However, educators should mention to students in high school that saving can be a lifesaver. Also, students can use online calculators that show their interest, this may be helpful to students visually.
In conclusion, even though student loan borrowers are in default it is preventable and can be solved. However, as I mentioned before following a payment plan, living on a budget, being educated about students, finding jobs that offer forgiveness or pay debt, and lastly saving money. Thus all I mentioned above regard student loan debt solutions.
Work cited page
- Administrator, dallasnews. Navigating the Student Loan Mess. Dallas News, Dallas News, 27 Aug. 2019, www.dallasnews.com/business/personal-finance/2014/10/04/navigating-the-student-loan-mess/.
- Block, Sandra. The Right Way to Borrow for College. Kiplingers Personal Finance, 10 Sept. 2014,www.kiplinger.com/article/college/T014-C000-S002-best-college-values-2019.html
- Carter, Shawn. These Companies Will Help You Pay to Go to College. CMBC Make it, 23 Aug. 2017, www.cnbc.com/2017/08/23/these-companies-pay-for-college-tuition.html
- Dynarski, Susan. How to Clean Up the Student Loan Mess. New York Times, 6 Apr. 2018,www.nytimes.com/2018/04/06/business/how-to-clean-up-the-student-loan-mess.html
- Johnson, et al. What are Student Loan Borrowers Thinking? Journal of Financial Counseling and Planning, vol. 27, no. 2, 2016, pp. 184-198, doi: 10.1891/1052-3073.27.2.184
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