NEW YORK, June 14, 2023 (Newswire.com) - Credello: The student loan crisis has gotten out of control. As we wait for the Supreme Court's verdict on President Biden's student loan forgiveness plan at the end of June, let's look at the numbers to see how much debt students are taking on and how you can repay your loans.
What the data on student loans says
In total, there is $1.75 trillion in student loan debt between federal loans and private loans. On average, borrowers owe $28,950. The state you live in also tends to impact how much you owe. For example, residents of New Hampshire have the highest student loan debt average at $39,928 per borrow. Utah is the state with the lowest average at $18,344.
The vast majority of student loans are federal - 92%. The remaining 8% are private loans from providers like Sallie Mae. Public four-year institutions had a slightly lower rate of students taking on debt (55%) than private four-year institutions (57%).
Due to interest, the average balance of student loans is even higher than the average amount borrowed. The current average balance for federal loan borrowers is $35,210, and the state with the highest average is Washington, D.C., with an average balance of $54,708 per borrower.
Gender also plays a factor in debt, with women and people of color disproportionately impacted by student loan debt. 47% of women hold student debt compared to just 40% of men. 50% of Black adults have student debt compared to 44% of White adults and 37% of Hispanic/Latino adults. On top of that, Black adults carry a higher balance than White adults - $9,800 versus $8,700, respectively.
Student loan repayments on federal loans have paused for more than three years, since March 2020 and the start of the COVID-19 pandemic. Payments are expected to resume 60 days after the Supreme Court announces its ruling or 60 days after June 30, 2023, whichever comes first. Time will only tell how many people will default on their loans or struggle to keep up with payments in a time with high inflation and stagnant wages.
Using a personal loan for student loan consolidation
If you have multiple student loans with high-interest rates, you might be able to consolidate them into one personal loan with better interest rates. This saves you money and effort by focusing on one bill each month. The specific documents required for a personal loan can vary depending on the lender and the nature of the loan. However, here are some standard documents that are typically requested by lenders when applying for a personal loan:
1. Identification Proof
2. Proof of Income: Lenders often require income proof to assess repayment capacity. This can include documents such as:
- Pay stubs
- Tax returns
- Bank statements
- Employment letter
- Self-employment documents
3. Proof of Address: documents such as utility bills (electricity, water, gas), rental agreement, or a recent bank statement or credit card statement that shows your address.
4. Credit History
5. Employment and Financial Stability: Some lenders may request additional documents to verify your employment and financial stability, such as:
- Employment verification letter
- Proof of assets
- Debt obligations
6. Loan Application Form
If you have been denied a personal loan by lenders, you should first review the rejection letter or notice. Lenders are generally required to provide a reason for the loan denial. Common reasons include a low credit score, insufficient income, a high debt-to-income ratio, or a negative credit history.
You should also obtain a copy of your credit report to review for any errors, inaccuracies, or negative information impacting your creditworthiness. If you find any errors, dispute them with the credit bureaus to have them corrected. If your credit score was a factor in the loan denial, but there aren't any errors, take steps to improve it. This may include paying off existing debts, making timely payments, reducing credit card balances, and avoiding new credit applications.
Traditional banks and financial institutions have strict lending criteria. If they deny you, consider exploring alternative lenders like online lenders, credit unions, or peer-to-peer lending platforms. These lenders may have different approval standards and be more willing to work with borrowers with less-than-perfect credit.
Finally, you may want to find a co-signer if your credit or income is insufficient to qualify for a personal loan. This is someone with good credit and income who agrees to be equally responsible for repaying the loan. Having a cosigner can increase your chances of loan approval and may even help you secure a lower interest rate.
Other ways to manage student loan payments
Managing student loan payments can be challenging, but you can effectively handle them with careful planning and organization. Here are some steps to help you manage your student loan payments:
- Understand your loans: Familiarize yourself with the terms and conditions of your student loans. Identify the type of loans you have (federal or private), the interest rates, repayment options, and any specific benefits or protections associated with them.
- Create a budget: Develop a budget that includes all your income and expenses. This will give you a clear picture of your financial situation and help you determine how much you can allocate toward your monthly student loan payments.
- Explore repayment options: Federal student loans typically offer various repayment plans, such as Standard Repayment, Income-Driven Repayment (IDR), and Graduated Repayment. Research and compare these options to find the one that suits your financial circumstances best. Private loans may have different repayment options, so contact your lender to understand the available choices.
- Prioritize high-interest loans: If you have multiple loans, focus on paying off the loans with the highest interest rates first. By doing so, you can minimize the overall interest you'll pay over the life of your loans.
- Explore loan forgiveness and repayment assistance programs: Investigate if you qualify for any loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF) for those working in qualifying public service jobs. Additionally, some employers or professions offer loan repayment assistance programs. Research and take advantage of these opportunities if they align with your career goals.
- Communicate with your loan servicer: Stay in touch with your loan servicer and inform them of any changes in your financial situation. They can provide guidance and assistance, such as helping you switch repayment plans or explore deferment or forbearance options if you're facing temporary financial hardship.
The dire state of student loan debt in 2023 emphasizes the need for effective management and repayment strategies. The pause on federal loan repayments due to the COVID-19 pandemic is expected to end soon, potentially leading to challenges for borrowers. Do not underestimate the importance of informed financial planning and proactive measures to effectively navigate the student loan crisis.
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Original Source: Credello: Here Are the 2023 Numbers for Student Loan Debt