Author Archives: admin

A crisis is emerging for millennials and it’s threatening to engulf their whole generation. Currently, 44 million Americans hold $1.53 trillion worth of student loan debt. That’s a lot! But what’s even scarier is the majority of that is from millennials. The amount they owe has just topped $1 trillion. This is new data according to the New York Federal Reserve Consumer Credit Panel.

42% of people aged 19 to 29 have student loan debt. The average debt payment for this age group is $393 per month. That’s just average, with just as many millennials paying more than that as there are paying less. For many, that’s a rent payment. Worse yet, they’re stuck paying that student loan debt for decades, unable to get ahead of it.

This crisis is changing the way millennials buy goods. Because student loan debt has sapped their budget, they can’t afford basic goods. They view buying a home, a car, and other major purchases less favorably than other generations. They’re even putting off getting health insurance, getting married, and starting a family. They simply can’t afford it.

Call Now 844-332-2079

Student Loan Debt Causing Economic Havoc

79% of young adults think that student loan debt is a major problem for the younger generations. They understand what’s going on, but still decide to go to college. 70% say financial circumstances led them to go to college. Chasing the American dream and finding a good career is why you go to school in the first place.

The problem is, student loan debt is making going to college almost not worth it. Many millennials are regretting going to school. They spend four years getting their degree and the next 10-20 paying off the loans. They end up not getting the good job they thought they would. Many even spend several years after graduation looking for work and taking fast food jobs just to survive.

Still, it’s not just millennials who are worried about the impact of student loan debt. The Federal Reserve is getting afraid as well. They released a quarterly report on household debt and found that student debt jumped by $79 billion in 2018 alone. These are scary numbers that are threatening to doom the economy.

http://financialhelpers.com/63-of-millennials-who-bought-a-house-have-this-regret/

Student loan debt is currently ranked #2 behind only mortgage debt. It’s more than credit card and auto loan debt. Considering how many people own cars and carry credit cards, this is a ridiculous amount of money owed! As it keeps growing, it will only serve to stunt the economy even further.

The reality many people face when it comes to having student loans is its impact on their credit. Whether you just now signed the first loan, or you’ve been working on paying for years. Student loans can be troublesome, or they can be a blessing in disguise. It all depends on your outlook and how seriously you talk situation.

The sad truth is, too many people to sign the dotted line without much thought. They believe student loans are a way to unlock their brilliant future. They can’t afford college on their own, so they get help paying for it without thinking about future repercussions. This is extremely dangerous and detrimental.

Currently, in the United States, 44 million Americans owe $1.53 trillion worth of student loans. A lot of these people go into default. It hits their credit hard, because they couldn’t figure out a way of making monthly payments. Imagine having to pay rent twice a month. Still, the struggle is fitting student loans into your budget.

There’s the process of navigating repayment programs. In a lot of cases the student loan servicer themselves in the process increasingly difficult. There’s a lot of dancing and maneuvering to ensure that your student loans don’t destroy your credit score. But a lot of that has to do with whether you were prepared to take care of the problem ahead of time.

The Problem with Student Loans

Most college-aged students, under ordinary circumstances, would not qualify for a loan. They simply don’t have the credit, work experience, or salary that would allow a bank to trust him. So, the problem usually stems with guaranteed federal loans. The federal government is giving people money under ordinary circumstances wouldn’t be trusted.

These are people who don’t understand the concept of a budget. Their little work experience amounts to maybe part-time at a fast food joint. Still, the government gives them between $30,000 and $100,000 to go to school. As soon as they graduate, that loan is due and payments begin almost immediately. You get very little downtime to settle and decide your next step.

In reality, the best thing you can do is be prepared ahead of time. Understand the pros and cons of taking out student loans. Most college students wouldn’t have much experience in managing their credit. With little experience they have might come from their parents co-signing for an auto loan.

There are ways you can prepare this massive burden ahead of time. It’s better to know and have a strategy going forward than being bombarded with debt after you graduate.

Strategies for Protecting Your Credit

Your credit score is determined by a number of factors. Those factors include how many loans you have, on-time payments, and the length of your credit history. Having zero loans can actually harm your credit. That means you have a great opportunity to make a few right moves that can benefit your score.

http://financialhelpers.com/how-to-financially-plan-for-the-unexpected/

The first thing you should do is not waiting to start paying off your student loans until you graduate. If you can swing it, start making payments immediately. Having a job while going to school can take a bit of the pressure off. It means you’re not taking out loans for something you can pay on yourself up front.

Still, one of the major issues with student loans down the line is interest. You don’t just pay what you owe, but thousands of dollars in interest on top of it. If you’re paying off your debt over the years you’re in school, you will leave with good credit. That will set you up for future success.

What is the nature of student loans and how do they hurt Americans? Well, the first clue is to look at the structure of a normal loan in the free market. Loans allow people to borrow vast amounts of money they wouldn’t ordinarily have access to. This is great for the free market. If you want something you can’t afford outright, you get a loan.

In exchange for that loan, it’s expected that you make payments. Interest is most likely tacked on, making the loan worth it for the bank. They make money on their loans. If you don’t pay your loan back, the lender can come after you. They can repossess the item purchased with the loan. There’s always a bit of give-and-take.

In order to qualify for a normal loan, you have to show some type of responsibility. Credit history, work history. A record of on-time payments. A decent credit score. These are staples of the lending industry. Of course, student loans are completely different. They don’t operate the same way other loans do.

For one thing, consider your education. If you can’t pay back your student loans, no one can come in and repossess your education. Because of that, it makes offering student loans a risky proposition. Yet, the government guarantees loans to students through the Higher Education Act which was passed in 1965.

The Harmful Consequences of Guaranteed Student Loans

You might think guaranteed student loans is a great thing. Someone who wants to go to school gets the opportunity to do so. It’s the American Dream, right? You get to go to the school you want, have your education, and graduate. Then comes the part we all love, getting the job we worked so hard for!

But, in reality, that’s when the problems really start. Millennials are the most educated generation America has ever seen. No other generation saw as many students go to college and get a degree than this one. The problem is, so many of them had to rely on student loans. By the time they graduated, they racked up tens of thousands of dollars’ worth of debt.

For years, young Americans have had it pounded into their brains that they needed to go to school. It was almost as if going to college was an automatic decision and it was the ONLY way they’d make it. Sadly, that’s not true. There are plenty of better options for a lot of young Americans. For example, going to a trade school doesn’t require 4 years. Trade jobs are in high-demand and pay decently well.

Worthless Classes Never Pay Off

Having secured finance options saw a lot of students apply for college to get a 4-year degree. That’s where another phase of the problem set up. Schools had to create more programs and curriculums for the ever-expanding interests of their students. Colleges were mostly for those interested in math or science. So, what about the students not interested in those courses?

That’s right, schools expanded arts and humanities. As the demand increased, so did the price of tuition. Universities knew people would pay whatever they had to in order to attend. That meant schools could really charge whatever they want. Before anyone knew it, a single textbook could cost hundreds of dollars.

http://financialhelpers.com/college-donations-skyrocket-to-a-record-number/

It didn’t matter to students all too much. Why? Well, because they have access to student loans. They could take out more money as they needed it. With the expectation of their degree paying off, students didn’t care how much they borrowed. That mindset completely bites them in the end. They didn’t anticipate what would happen after they graduate.

People with no real work or credit history are able to take out between $38,000 and $165,000. Financially, that’s a major burden to really start life with. Even with a great job market, students aren’t entering the workforce making the kind of money they thought they would. In the end, their lives were ruined, unable to pay even basic bills.

Many people in American enjoy taking advantage of charitable giving. Maybe they tithe to a church or gave money to help support research. Regardless of what people give their money for, they often qualify for a tax write-off. With the new tax law in place, records show that more people are giving college donations than ever before.

Donations given to universities and colleges are up 7% compared to last year. This is according to a new survey by the Council for Advancement and Support of Education’s Voluntary Support of Education. Americans gave to college donations as much as $46.73 billion during the last academic year. That’s a lot of extra dough!

The winner in all of this is Harvard University. It collected the most college donations at $1.42 billion. Sanford ranks #2 with $1.1 billion. The University of California hit the #3 and #4 spots. UofC Los Angeles and San Francisco received $790 million and $730 million respectively. The top ten schools received 18% of all the funds compared to over 900 schools surveyed.

College Donations and Charitable Giving

Last year, charitable giving in the form of college donations were increasing in popularity. People saw this as a type of charitable investment account. Once they gave to the school of their choice, they were able to add what they gave as a write-off in their taxes. College donations work in their favor as a tax break.

It’s understandable that people would want to give donations to schools of their choice. They get a big write-off, so there is a benefit to giving. Still, the big question is whether these college donations should result in lower tuition. More people are giving these schools money. Why can’t they do something about insanely high tuition?

http://financialhelpers.com/millennials-say-home-ownership-is-more-difficult-and-baby-boomers-agree/

Most of these schools also make millions in profits from sports all without having to pay their student-athletes a dime. Colleges also benefit from government subsidies. They get to continue to increase their tuition while money flows into their coffers from all directions. Yet, Harvard still gets to accept a billion dollars in college donations on top of everything else.

But, instead of tackling issues like student loan debt or lowering tuition, these schools raise it. The American university is all about the profits and nothing more. While millions of students are suffering under the weight of high tuition, they get billions in college donations. It doesn’t seem fair to the students, but that ultimately doesn’t matter when profits are being made.

As more people become trapped by student loan debt, the larger the crisis becomes. While some people are able to keep up with their payments, many Americans cannot. When that happens, they become seriously at risk for defaulting on their loan. Defaulting on your student loan can negatively impact your credit score and more.

Before a person is considered to be in default, they are considered delinquent. According to Bloomberg, the amount of delinquent student loan dollars has reached a new record high. The Federal Reserve Bank estimates that around $166 billion is currently overdue. To be considered delinquent, you must miss 90 days’ worth of payments.

This only goes to show the extreme situation caused by student loan debt. Many people are desperate for help, begging the government to forgive what they owe. However, that idea doesn’t seem likely, even with the push from younger Democratic candidates in recent years. The entire program needs to be overhauled to allow the government to recoup its losses.

Call Now 844-332-2079

Causes of the Student Loan Delinquencies

The crisis really started in 2008 as a result of the beginning of the Great Recession. By 2012, so many people were out of work that they decided to go back to school. They were enticed by fraudulent job-placement claims and the promise of a good job once they graduate. When they did leave school with a shiny new degree, the job situation remained equally as bad.

That meant millions of Americans had an abundance of student loan debt and no job to make payments. Delinquencies and cases of default increased dramatically, as did the total amount of debt owed. Currently, Americans owe $1.53 trillion worth of student loan debt, a number that might hit $2 trillion soon.

Even now, as unemployment rates have fallen below 4%, the problem continues. We’re seeing the strongest job market in many decades. The problem is, wage growth hasn’t increased too much. People still aren’t making enough money to pay for their student loan debt. They’re also fighting to be able to afford other basic necessities.

We’ve extensively covered how much the economy is due to be impacted by this crisis. A large portion of millennials are fighting to keep their financial heads above water. Even income levels among college graduates remain low and is a major hindrance.

Income levels for graduates “are not necessarily high enough for debt payments overall,” said Ira Jersey, Bloomberg Intelligence interest-rate strategist. “If you have a choice to pay your student loan or for food or housing, which do you choose?”

Higher Deficits on the Way

Student loan delinquencies and non-payments hurt the U.S. economy in a number of ways. As just stated, if you can’t afford the basics, you’re not spending money on the big things. Many millennials are putting off major life decisions, like buying a home and getting married. They simply can’t afford these things like our grandparents and parents did before them.

Another impact to the U.S. deficit. The national debt recently reached $22 trillion. $1.53 trillion of it is due to the student loan deficit. That’s because the majority of student loans are given by the federal government. While this type of debt most likely won’t cause another Great Recession, it still hurts the economy.

http://financialhelpers.com/student-loan-payments-may-soon-be-taken-from-your-pay/

As the cost of a college education continues to climb, this problem will only grow. Tuition has more than doubled in the last twenty years. More than ever, young adults have to ask whether a degree is right for them. It’s not a simple answer anymore if spending four years in college will enslave you to your student debt for decades to come.