Ask any parent who is struggling to put their child through college, what their #1 fear is and that answer is simply one word: Debt. About 1 in 4 student loan borrowers are in default. The average parent borrows $21,000 in student loans for their children’s education, according to a recent study by researchers at the University of Southern California and the University of South Carolina. The national statistics are staggering: Americans owe nearly $1.3 trillion in student loan debt, spread out among about 44 million borrowers. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up 6% from last year. Nearly 70% of bachelor’s degree recipients leave school with debt, according to the White House, and that could have major consequences for the economy. Another recent survey by Citizens Bank shows that 59% of millennial graduates have no idea when their student loans will be paid off.
Jennifer Ailshire, an assistant professor of gerontology at the University of Southern California, co-authored a study on the current state of student debt. She says the latest statistics are mind-numbing, and this debt crisis is not just about students, it’s about parents as well.
“This is a relatively recent phenomenon. Parents didn’t take on a lot of student loan debt until about the 1990s. It’s very closely linked to rising tuition and increases in the number of kids going to college. It paints a dismal picture and we’re only at the beginning of this trend.”
Parents with a household income of $120,000 or more borrow an average of $30,000 for their children and are more likely to take out student loans. The study was funded by the National Institute on Aging.
Not long ago, US News & World Report published “10 Student Loan Facts College Grads Need to Know”
1. Learn about your student loans. Make sure you know if your loans are federal or private and know what the interest rates are.
2. Know who your loan provider is. Check with the National Student Loan Data Base System.
3. Check if your loan has a “grace period”. Many private and federal loans do. A grace period will give you time to figure out a repayment plan.
4. Make a “grace period payment” to help. A payment will help reduce the payment of the balance of the loan.
5. Take action on your loans during your unemployment. You may be able to enroll in an income driven plan to reduce your payment amount.
6. Defer a loan by continuing your education.
7. Place a loan in forbearance to postpone payments. This will postpone payments but interest will still accumulate.
8. Avoid defaulting on a student loan. Every lender has a plan for every student.
9. Enroll in a payment plan.
10. Develop a student debt repayment strategy.
See more here, and watch CNBC Senior Personal Finance correspondent Sharon Epperson talk more about student loan debt implications for students and parents, below.
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