Student Financing options

Student loans help students pay for college, filling financial gaps and providing essential funds to cover educational expenses while students are pursuing their higher education. In fact, it’s the largest source of funding for most students in an undergraduate or graduate program, check over here to get all the details.

Yet the federal government allows debtors in default on loans to receive federal student loans at interest rates that are almost double the rate of inflation. In addition, federal student loan debtors are unable to refinance their debt at lower rates than the average consumer could get.

Why student loan amnesty isn't effective (opinion)

In addition to the unfairness of student loans, they also provide little financial assistance to those who need it most. Students and their families were shocked in 2013 when they learned that the average student loan debt of a private student borrower was over $35,000. The typical borrower in the lowest income bracket has student loan debt of more than $25,000. The majority of undergraduate and graduate student debt goes to graduate student debtors.

The burden is not evenly shared, either. Lenders use a single income standard to calculate student loan balances. They calculate the balance of each loan based on the highest income bracket of the borrower, regardless of whether the borrower is employed or not. This is unfair and inefficient, and the most direct way to change the rules would be for Congress to create a cap on the interest rates of student loans.

These financial barriers discourage students from seeking higher education, limiting their earning potential.

Accruals: While many young people would gladly have $10,000 a year to pay for school, their credit scores reflect a more realistic debt levels: just $21,500. Many college students have to borrow to attend schools that may cost them over $40,000 per year. As a result, they are not able to save as much for their future, such as retirement, through the loan repayment plan or public service.

If students were able to refinance loans at 3% or even 5%, they could ensure they could leave school with a decent financial cushion. But as of 2013, the federal government requires loans to be paid back no later than the borrower’s 25th birthday.

How Much Do U.S. College Students Spend on Student Loans?

Paying back loans: Today, nearly two-thirds of college graduates drop out before graduation. This means a college degree does not guarantee a job. In addition, most students default on their student loans because they cannot afford them. For many young graduates, the big debt burden is crushing.

If high-cost for-profit colleges could prove a low-cost alternative, then some colleges could remain open to all. But for-profit colleges have found it easy to redirect the funds of students into their own coffers and enjoy windfall profits.