Understanding Student Debt

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There are elements that define every generation, and in education these legacies are easily identifiable. For our grandparents, it was the rise of women and the beginning of diversity in education; for our parents, it was protests and self-expression in college. For today's generation, where college is becoming the expectation, not the exception, what will the legacy be? More and more, it's looking like the students of today will be remembered as the indebted.

Already there are signs that the debt of this generation, brought on by the sharp increases in tuition and the amount of time needed to complete a degree, is drastically altering the educational landscape. Students are changing the way they go to school by choosing online programs with flexible schedules and lower costs, overloading on classes, trying to graduate earlier, working multiple jobs while enrolled, and selecting majors that yield high salaries, regardless of their interest in the subject. Student loan debt is shaping the future of millions of young Americans and we have only started to see the repercussions.

College debt is a complex issue — one that is not going to be fixed overnight. However, we at BestColleges.com believe in the importance of engaging with difficult concepts and fostering dialogue in the hopes of sparking new insights and conversations that may aid in resolution. For this reason, we put together a collection of essays from individuals on the front lines of student debt. Our panel includes a financial aid expert, a professor, a student with a difficult choice, an online educator and career coach, and a lawyer dealing with the consequences of debt. Each essay brings with it the author's unique perspective on this complicated matter, highlighting the many approaches, opinions, and solutions that exist within the college debt discussion.

I encourage you to read through the collection and then reach out to us with your thoughts, comments, ideas, and responses, using the contact section below to add your voice to the conversation. Together, we can work to shift the legacy of today's generation and ensure that they, and future generations to come, are remembered for what they accomplished, not for the debts they bore.

Download PDF of Essays Here

Student Debt in the United States: By the Numbers

If you are currently applying for student loans or find yourself managing multiple student loan repayment plans, you are not alone. According to the Institute for College Access and Success, 68% of students who graduated in 2015 had student loan debt, averaging $30,100 per student. The Federal Reserve has reported a steady increase in non-housing debt over the past five years, which includes $1.31 trillion in outstanding student loan debt. Earning a college degree, which may include student loan funding, can result in greater lifetime income. However, the return on this investment depends on many variables, such as your field of study, tuition rates, time to completion, and salary after graduation. While student debt is increasing, there's a lot you can do to prepare for and manage the process of repayment.

Is it Possible to Graduate without Debt?

While a majority of students leave their undergraduate programs with debt, there are students who graduate without owing money to lenders. How do they do it? Many of these students use a combination of strategies to save money before college and earn money while they attend school. Saving money for college means advance planning and can include 529 plans or other savings strategies dedicated to college funding. Students may also be able to work on campus in a variety of positions, from part-time employee to research assistant to earn money that offsets college costs. If you are already working, ask your company if they offer any financial assistance or tuition reimbursement for specific programs or schools. Students graduating without debt also maximize available grants, scholarships, and financial aid from multiple sources.

Debt-Free Degree

Can I Have my Loans Forgiven?

Most loans cannot be forgiven, even if you don't finish your academic program. However, there are special circumstances that might warrant having your student debt forgiven, cancelled, or discharged. For example, federal loans may be eligible for cancellation if the school closes before you finish. Partial loan forgiveness is also possible for graduates who work for a qualifying public service employer (PSLF Program) or who teach full-time (Teacher Loan Forgiveness Program).

Private lenders do not usually offer forgiveness or cancellation options, but may be able to work with you to alter your repayment schedule during times of financial hardship. Make sure to keep making payments while you work through the approval process for forgiveness, cancellation, or discharge of your loan, whether your loans are from federal or private lenders.

What Happens if I Can't Pay My Loans?

Before defaulting on a student loan, research all of the available options with your loan lenders and servicers. Many lenders are willing to work with you to develop a plan for repayment if you contact them in advance. Options may include refinancing, forbearance (i.e., putting a temporary hold on repayment), and flexible repayment plans. Check with each of your lenders to find out if deferments or grace periods are part of your original loan agreements. You can also pursue loan consolidation (i.e., combine multiple loans into one monthly payment) for federal or private loans.

The federal student loan system makes several provisions for selecting a repayment plan that meets your needs. You can also change plans after you begin repaying your loans. Use the repayment estimator online to find out which plans you may be eligible for. Options include: graduated repayment--in which payments begin at a lower rate and gradually increase-- extended repayment--allowing up to 25 years to repay your loans--and pay-as-you-earn and income-based repayment that's calculated based on your income and other demographic information (e.g., number of children, marital status).

There are fewer alternatives with private loans. Ask about the possibility of refinancing your loan at a lower interest rate. Other possibilities may include temporary loan deferment if you become unemployed. To find out what options may be available, contact your lender's loan servicer directly.

Defaulting on your student loans can result in garnishment of your tax return and/or current wages. Your options for negotiating with student loan lenders and loan servicers decrease after you go into default, so talk with them before this happens. Do what you can to continue making payments while you work toward a resolution. You should also try to maintain a good credit score and avoid applying for additional loans or potential debt (e.g., credit cards).

Resources for Managing Student Loans

The Federal Trade Commission reminds you that "there's nothing a private company can do for you that you can't do yourself," so arm yourself with the information you need to manage your debt effectively. These resources include guidance for working with your lender, federal or private, to make sure you stay up-to-date with repayment and address any challenges that emerge during the life of the loan.

Consumer Protection Agencies

Federal Trade Commission (FTC): The FTC is a government agency with a mission to protect consumers from fraudulent, deceptive, and unfair business practices. This group helps students by identifying scams related to loan repayment, forgiveness, and consolidation. Review the FTC's guidelines for seeking repayment options and finding out what you are eligible to do. The website also provides tips for recognizing the signs of a scam, such as "you shouldn't have to pay an up-front fee."

Consumer Financial Protection Bureau (CFPB): The CFPB is another government agency dedicated to providing consumers with information that empowers them to make good financial decisions. Learn about how to research lean options and establish a relationship with a bank through the CFPB's online guides. You'll also find interactive tools that help you compare financial aid offers and develop a loan repayment plan.

Budgeting and Saving for College

Saving for College: Our Best Colleges resources include a selection of guides for college decision making. This one provides an overview of recent trends in tuition costs and savings plans, and an interview with Stuart Ritter, a Vice President with T. Rowe Price Investment Services. Check out Ritter's advice for parents and prospective students.

Budgeting 101: Our spending habits directly affect all aspects of our lives, and new college students are often just learning how to live within a budget. This Best Colleges resource provides step-by-step guidelines for creating a budget and tracking expenses.

Student Aid, College Prep Checklist: Part of the U.S. Department of Education's federal aid resource collection, this checklist serves as a quick reference guide for prospective students and parents of college-bound students. Find out what you should do to find money for college.

Help with Getting out of Debt

Student Loan Hero: Student Loan Hero, Inc. is one of many private organizations offering debt management advice to people struggling with student loans. Register online for access to free resources that organize your loans, to create a personalized repayment plan, calculate repayment rates, and explore loan consolidation options.

Student Aid, Repaying Your Loans: This guide includes a detailed to-do list for students with loans who are getting ready to graduate, drop out, or reduce their enrollment status. Learn more about federal loan grace periods, repayment plan options, and tips for avoiding missed payments.

American Student Assistance (ASA): This non-profit organization provides resources to help with college financial planning and with managing student debt. Explore free online information guides and see if your school is one of more than 300 partnering with the ASA. You can also join the online community to get one-on-one advice, access digital tools, and work through financial tutorials.

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