This might be a test of affordability!
You may wonder what all of this means. Well, here we are talking about the affordability of education.
With soaring tuition fees in the US, earning a college degree has become out-of-reach for many average citizens. Yet in order to acquire a respectable job with decent pay, a college education is still required.
So, young Americans with starry eyes and big dreams resort to the only option they have, taking out expensive educational loans. Aware that tuition is rising, they are still taking a gamble on education as a stepping stone to the American Dream.
Later, this gamble turns into a game of survival when the time comes to pay their student loans back.
How students loans can hammer a borrower down
During the 1980s, a woman from Arizona took out three student loans amounting to $ 8,400. She and her family repaid two loans, however she struggled to pay back the third. She missed out on a few payments and that led her loan servicer to seize her tax refund.
Subsequently, she found that the loan servicer's record was showing that she had been on loan default status for 30 years; therefore she owed over $ 36,000! She repeatedly claimed to have made payments, however her credit report was not accurately reflecting such data.
The story mentioned above could be a classic case of misunderstanding and a communication gap between a borrower and her loan servicer. However, in each circumstance, borrowers would be at the receiving end if they miss out on even a few loan payments.
What the Future Holds?
Honestly, the future doesn't look that encouraging.
Each academic year, the interest rate on student loans is skyrocketing, causing more worries for borrowers and those who are contemplating taking out education loans.
In July of 2014, student loan interest rates for 2014-2015 have increased yet again. It's an increase by 20% compared to the previous academic year.
The changes in the interest rates are listed below:
- New interest rates for direct subsidized and unsubsidized Stafford loans will be 4.66%.
- Direct unsubsidized Stafford loans will have interest rates of 6.21%.
- Interest rates for Direct graduate PLUS loans will be 7.21%.
Direct graduate PLUS loans and direct parent PLUS loans interest rates have gone up to 7.21%.
These changes in the interest rates might leave an impact on the number of enrollments as many would hesitate considering the high education cost. In order to meet the costs, they will invariably take out education loans, which is likely to create an additional financial burden for them.
A Solution Within Reach
Those who have already taken out a large amount of student loans, or for those who are still thinking over it and feel intimidated by the thought of accumulated debt, a solution is available.
When borrowers feel the pinch of high monthly payments that are putting a dent in their budget, they can consolidate their federal loans and reduce their payments. For example, if they opt for government-backed programs such as the Income Based Repayment (IBR) Plan or Income Contingent Repayment (ICR) Plan, their monthly payments can come down sharply. If their gross adjusted income is low and their family size is bigger, they can even qualify for $ 0 monthly payments!
In order to understand how to get relief from your student debt, you can discuss the matter with a consultant for federal student loan relief. A consultant can help you understand the consolidation process, and he can also help in filling out an application with the Department of Education.