Imagine this: after endlessly combing through university websites in search of a reputable program for what you want to study, and touring campus after campus, you stumble upon your dream college.
It offers the major you want to pursue, there are countless opportunities to grow professionally and personally, the atmosphere exudes warmth, and the social scene is popping. Your gut instinct is screaming yes, but, there is one downside–the cost.
As a young adult (and most likely a broke one), you feel your stomach drop when you see the numbers associated with tuition, meal plan options, housing options, and textbooks. But you can’t shake that initial feeling that this college is where you want to spend the next four years.
Thus, the term student loans suddenly takes precedence in your life.
As you sign the dotted lines to take out federal student loans, the thought barely crosses your mind about how you’ll make enough funds to pay them off post-graduation.
Instead, the thoughts of making new friends, sharing a small bedroom with a stranger, impending class schedules, the course workload, and avoiding the infamous freshman 15 are at the forefront of your mind. And the thought of paying off what you just committed to slips your mind almost as fast as the amount of time it took you to sign the paperwork.
Flash-forward four years. Now, in the midst of adjusting to the professional work world, those dreaded student loans have also become a reality.
According to a recent report from The White House, 71 percent of students who have a bachelor’s degree emerge from college with student loan debt–the average owed is $29,400. Moreover, according to Student Loan Hero, on average, a 2016 college graduate has $37,172 in loans.
Stressful. Lingering. Everlasting. These words characterize student loans.
These statistics are just the root of the issue–there are a number of complications associated with the process of paying off student loans.
The term default, which happens after nine months of missed payments, is the root of a number of consequences. At this point, the entire loan balance becomes due in full and the interest is capitalized to the principal balance. This means that you’ll be charged interest in addition to the interest you haven’t paid. The loan default is then reported to consumer reporting agencies, which negatively impacts your credit score.
In order to cover what you owe, the federal government can seize your state and federal tax refunds, other government payments like social security, and up to 15 percent of your wages.
“I understand that college costs money, but the amount we pay for a college degree is pretty insane,” Colleen, a 2016 college graduate who has just begun paying her student loans, comments to BTRtoday. “Not only that, but when you finally get out of college it takes a long time to save up funds to live and pay minor bills. On top of paying off loans, interest will add so much money to your ultimate loan payments in the long run.”
With the election just around the corner, the issue of student loans is one that is at the forefront of many young voters’ minds. In a survey conducted by USA Today, nearly 60 percent of young adults surveyed who have student loans said that it’s impacting their decision on who to vote for in the presidential election.
While both candidates for the election have proposed expanding student loan forgiveness to make it easier for borrowers to get out of debt, experts have criticized Trump’s plan as too expensive and have commented that Clinton’s plan is more robust.
“There’s a trust issue among young people–they are questioning whether the system works for them, whether that’s in regards to student debt, health care costs, or the job market. They’re wondering if the system will afford them the same opportunity their parents had,” says Andrew Plepler, Environmental, Social and Governance executive at Bank of America in an interview with USA Today.
Similarly, American University professor and political behavior expert Jan Leighley in an interview with USA Today, said it makes sense millennials are focused on these issues “having the recession of 2008 in mind, and having seen parents and neighbors lose jobs and houses.”
While there may be a general distrust among millennials regarding the way student loans will take form in the future, there are measures that can be taken to make the process of paying student loans as seamless as possible.
A WQAD article recommends that students start paying off their loans while still attending undergrad, as it is common to avoid paying student loans until it becomes absolutely necessary–six months post-graduation. According to a calculation from CommonBond, setting aside $75 per month will save you $694 in interest by the time you graduate (assuming that you borrowed $10,000 with a 7 percent interest rate for freshman year).
“Try to chip away as much as possible while you’re in school. Those tiny payments–however small–really do add up,” says Ruchi Patel, a college graduate who paid off $23,00 of her student loans within two years.
Additionally, living at home post-graduation to save money on rent is another recommendation for getting a head start on tackling loans.
However, if your heart is set on one school that is costly, there is also the argument that the experience of one’s dream school outweighs the long term effects of paying off student loans.
“Even though I have many years ahead of me paying loans, it was so worth it. During my college career, I truly became myself and really bloomed into an independent person that I am proud of,” Colleen adds. At my university, I had my most meaningful life experiences that really shaped my heart and my mind. It’s really inexplicable, but my college career was overall an incredible positive time in my life and I would do it all again in a heartbeat even though I believe student loans are over the top.”
In sum, while student loans are an inconvenience, if they are managed and tracked properly, they can be less painful as they take form in the future.