what 1.5 trillion in student loans means for the average borrower

What $1.5 Trillion of Student Debt Means for the Average Borrower

Michael Lux Blog, News, Student Loans 0 Comments

Student loan debt in the United States is now climbing past $1.5 trillion.  Not only are there more borrowers, but on average they owe more.  Some in the media portray hitting this milestone as no big deal, or even a potentially good thing, while others proclaim doom and gloom.  For the average borrower, the new level of debt takes on significance for other reasons.

The Risk of Student Debt is Real

When college was less expensive and student loans were rarely used, student debt was a much less risky proposition.  Students who didn’t complete college could still afford to pay off their debt.  Graduates who picked schools or majors that weren’t valued by employers still had a chance to manage their loans.  At that time, bankruptcy was still an option for borrowers who couldn’t afford their loans.

Today the price of college has grown considerably, and with it, the amount of student loans borrowed… hence, the reason Americans owe $1.5 trillion in student loans.  This makes finishing school essential to affording loan payments.  Students who didn’t pick wisely when it came to colleges or majors might still be in trouble.  Making things even more dangerous is the fact that bankruptcy protections are almost non-existent for student loan borrowers.

The monumental shift in student loans has created a dangerous situation for many borrowers.  As a result, things may be changing for all borrowers, even those that can afford to make their monthly payments.

Keep an Eye Out for New Resources

The burden of student debt has caused the government to take action in numerous ways.  Just over 10 years ago, the Public Service Loan Forgiveness Program was created to help borrowers with large amounts of student debt afford to work for the government or non-profits.  At the end of the Obama the Revised Pay As You Earn Repayment Plan was created.  The REPAYE plan lowered monthly payments for many student loan borrowers.  The key was knowing about the new plan in order to get signed up.

In the private sector, the rapid growth of student debt has lead the creation of a robust student loan refinancing marketplace.  These lenders won’t help people in desperate financial situations, but for those with good credit and a job, it is possible to get dramatically reduced interest rates.  Ten years ago, most of the refinance companies didn’t even exist.

Another front to watch will be the employer benefits possibilities.  Many companies are realizing that having a student loan assistance program is an excellent way to attract top talent.  Financial services firms are lining up to help facilitate these programs and make money in the process.  As a result of this interest, support is growing to create tax advantaged student loan employment benefits, similar to how a 401(k) works.  Creating this sort of legislation would allow members of Congress to claim they are helping average student loan borrowers.  It would also make their corporate donors happy.  Don’t be surprised if this sort of program becomes a reality in the next few years.

Join the Discussion and Be Part of the Solution

As we already noted, new laws will almost certainly be written pertaining to student debt.  Hitting $1.5 trillion isn’t necessarily the proverbial last straw, but it is a significant milestone that could lead to legislative action for a growing problem.

The decisions made in Congress will have an impact on borrowers, so anyone with student debt would be wise to keep an eye on what is happening in Washington, and most importantly, register to vote, and participate in elections.  The more student loan holders that vote, the more attention it will get from Congress.

$1.5 Trillion and Your Student Loans

Hitting a massive national student debt milestone won’t make life with student debt any different overnight.  Not much changed in the wake of hitting an even trillion just 5 years ago.

Even though reaching $1.5 trillion isn’t going to yield immediate impacts, it is definitely a sign of the severity of the student debt problem in the US and a good indication that the status quo probably won’t continue as is.