Posted by Suzanne Martindale in Credit, Student Loans
This past weekend, the San Francisco Chronicle highlighted the harsh realities of student loan debt – and how it impacts the nation’s economic recovery:
“In her 20s, Connie Swain shelled out a lot of money to a private vocational school to learn computer skills, relying on student loans for tuition and expenses. ‘I was young and didn’t really have a sense of how to do things,’ said Swain, now 44…I didn’t realize what I was getting myself into at the time.’”
Connie works as a case manager for homeless families at a San Francisco nonprofit, and would love to be able to buy a home, but her student debt holds her back:
“‘I want to create something long term for my kids and their children,’ she said. ‘As much as I pay in rent, I feel like I should have an opportunity to own. But I can’t even look into (purchasing) until I figure out my whole student loan and my credit.’”
Connie’s story is all too common – and unfortunately, as more student loan borrowers struggle to repay their loans, our economy will feel the impact. Debt-laden graduates are more likely to postpone milestones like buying a home, and their income will be funneled into loan payments instead of stimulating the economy. According to the Federal Reserve study, only 9 percent of people ages 29 to 34 got a first-time mortgage from 2009 to 2011, versus 17 percent a decade earlier.
Clearly, struggling student loan borrowers need relief. But interest rates on all new subsidized Stafford loans are set to double from 3.4% to 6.8% starting in July
unless Congress takes action. Subsidized Stafford loans are a type of federal loan given to students who have the greatest financial need. According to the consumer group U.S. PIRG, borrowers taking out the maximum $23,000 in subsidized student loans over four years will see their interest increase by $5,200 over a 10-year repayment period and $11,300 over a 20-year repayment period if the rate hike goes into effect.
Given these challenges, it’s important for students and their families to do their homework and plan ahead
. If you are an admitted or continuing student, fill out the Free Application for Federal Student Aid
(FAFSA) as soon as possible after January 1 to be eligible for federal student aid, including Stafford loans. Be sure to exhaust all your options for grants or scholarships before taking out loans. For more tips on how to graduate with less student debt, click here