At the end of 2015, borrowing money to fund higher education amounted to 10.2 percent of overall household debt, an amount triple that of figures in 2005, Bloomberg recently reported. Data released by the Federal Reserve Bank of New York shows that student loans are currently only second to mortgages when it comes to debts affecting entire families. Increasingly, many households are sinking deeper into debt because of student loans.
Huge Problem, No Real Solutions
The student loan debt in the United States amounts to an astonishing 1.3 trillion dollars. Roughly 11 percent of that debt is overdue in three months. Student loans have becomes a hot button issue in the U.S. that not many politicians seem to propose practical solutions for. Senator and 2016 democratic presidential candidate Bernie Sanders has offered to make public college free for all. Hillary Clinton, the other Democratic nominee, has proposed “New College Compact,” an ambitious and non-specific plan to make college debt-free. No other candidate currently running, or have run, for president this year has offered any other solution.
Serious Problems for Families
Regardless of whether a real solution to the college debt-crisis might emerge anytime soon, the reality is that a majority of American households are riddled with debt because of student loans. Most don’t see immediate solutions to their problem. Student loan debt can, in fact, cause long-term harm to families. Parents who end up spending majority of their budget to pay off their own student loans never have enough funds to save for their children’s college education. These children therefore also end up borrowing money, and the student debt cycle continues.
Getting out of students loan debt is tough as getting out of any kind of debt. However, it is easier than paying off personal loans. Most federal student loans have lowered interest rates, and are generous with grace periods and extensions. Certain private student loan creditors also are largely open to loan extensions and grace periods. However, most debtors are unaware of such measures they can take to reduce debt. Instead, most consider the extremes: taking out payday loans, selling houses and moving to trailer parks, calling a local Scottsdale bankruptcy lawyer, and taking on more jobs than humanly possible.
Getting out of Student Loan Debt
It’s actually not necessary to entertain such desperate measures to ending student loan debt. Often, the debt problems can be handled by the power of negotiation. For households close to bankruptcy, debtors can call the creditor directly and try negotiating a debt settlement. If the debtor ends up bankrupt, some state laws force the creditor to completely write off the loan. Therefore, most creditors prefer to negotiate and come to a settlement rather than let the debtor default on the loan.
Additionally, simple debt relief tactics, such as frugal budgeting, selling valuables for hard cash, and asking friends and family to chip in to help, could also work. Until a pragmatic and permanent solution to the student loan debt problem is found in America, debtors will have to find innovate ways to protect their personal finances.