If You Drop Out of College, What Happens to Your Student Loans?

Written by adminJune 8, 2019
Student Loan Consolidation

Not everyone enjoys the college lifestyle. After graduating from high school, many people go for their freshman year of college, but don’t return for their sophomore year. In fact, the National Center for Education Statistics says that only 81% of students return for their sophomore year. That’s a staggering drop! Community colleges have it even worse. Only 62% of students return the next year.

College can present many obstacles that force people to make tough decisions. It’s harder than anyone thinks to go to college full-time while at the same time working, making money, and keeping up with bills. During this time, student loan debt is accumulating wildly. Attempting to get a degree is a massive struggle that cause many to simply drop out and give up.

Even so, regardless of if you drop out or continue until the end, you’re responsible for the debt you incurred while at college. It means those courses were a waste of money that do nothing to improve your life and now you’re in debt trying to pay it off. Dropping out of college is never a good idea. There’s another reason why this is so.

College Degrees and Financial Freedom

While less people are enrolling into college these days, the benefits of getting a degree are still massive. People with a degree make a lot more money in their lifetime than those who don’t. If you drop out before getting your degree, you’re still on a path towards making less money. That means you’re stuck trying to pay the debt you incurred while not realizing your full potential financially.

The Urban Institute found that 42% of people who carry student debt have an associate degree or lower. While they have much less student debt than those who completed their courses, they are at a higher change of defaulting on their loans. That’s because they’re making significantly less money than those who have a 4-year degree or higher.

Defaulting on your student loans is not a path you should take. It will seriously cripple you financially by damaging your credit score and making it nearly impossible to do other things like buying a home or a car. If it gets bad enough, the lenders will garnish your wages and steal your tax refund until it’s paid off.

Taking Care of the Problem

If you think you’ve bitten off more than you can chew and are ready to drop-out, there are ways to handle it. There’s a process called exit counseling. Most students who have federal student loans are required to do this if they want to drop out. Exit counseling allows for the student to learn about all of their repayment options so when they do quit, they are prepared.

You do have a six-month grace period after you leave school. That will help you get on your feet without having to worry about student debt. But, whether you’re ready for it or not, that six-month grace period will end and you’ll be responsible for your loan. You could delay it even more with deferment, but your interest will still accumulate and it will increase your debt further.

Interest also accumulates during the grace period. That’s why you should start making interest payments immediately. Waiting until the grace period is over will also grow the debt you owe, making it more difficult to handle. It’s going to require you to be completely responsible and on your game.

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Student Loan Debt Crosses the $1.5 Trillion Mark

Written by adminAugust 28, 2018
Student Loan Consolidation

Student loan debt has long passed being an epidemic and has entered crisis territory. It was just announced that the amount due hit a record $1.5 trillion and continues to climb rapidly. A lot of it has to do with the increasingly higher cost of college, but students aren’t paying their bill.

The problem is, they can’t pay their debt and their rent at the same time. This is why a lot of young adults are living at home and working two jobs just to keep up with their bills. Depending on how much they owe, students pay as much monthly as it costs to rent a cheap apartment.

Repayment often begins as soon as the student graduates. This forces them to use payment adjustment schemes that might offer short-term relief by cutting monthly payments, but it doesn’t do the trick. You still owe the entire amount that you borrowed. This “strategy” only ensures that young adults carry student loan debt longer than they would normally.

Student Loan Debt Rising

Overall, the US student debt has grown by $500 billion since the 2010 to 2011 school year. It’s interesting to see that while the amount of debt piles up, actual lending volumes have been falling. The number of people obtaining student loans has been declining as well. This is causing a major problem.

Because students answer this repayment program that make monthly payments smaller, they don’t realize they’re not lowering the interest rate at the same time. That means they’re stretching out the life of their loan while even more interest keeps piling on. On top of that, if they miss a payment, additional fees are added.

Also: http://financialhelpers.com/5-student-loan-debt-statistics/

John Anglim of S&P agrees that the interest rates are what’s allowing the banks to make a killing off interest.

“By reducing the payments, they allow borrowers to stay current, but the balance keeps growing. That’s what we’re seeing now,” he said. “If the government is serious and concerned about growing student debt, then we need to come up with a broader plan rather than one that just helps a select few.”

Student Loan Debt Hurting the Economy

It’s easy to understand how debt can be a drag on the average U.S. household. Paying towards student loan debt takes money out of your pockets that can go towards your life. Because so many young people have debt, it has become a major drain on the economy. If more people are paying towards something, it’s not being reinvested back into the economy.

This is causing everyone from the poorest American to the highest-paid politician worried about the future of this country. How much more expensive will student loans get? Vincent Deluard, a strategist for INTL FCStone, sees it as a growing danger towards future economic growth.

“A significant portion of the millennial generation has gone bankrupt before it could start building wealth, which is a — still-unaddressed — threat to the long-term health of the US economy,” he said in a report.

In January, a report came out from the think-tank Brookings, revealing that the number of graduates who default on their student loans could reach as high as 40% by 2023. Overall, the government has to do a better job at creating student loan forgiveness programs.

Some currently exist, but no one knows how long they’ll be around. President Trump tried to cut these programs in his first budget, but had to give in to pass this year’s budget. Eventually, this problem will have to be passed to the government to figure out, as the amount of debt continues to climb.

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4 Things Every Parent Should Know about Student Loans

Written by adminAugust 24, 2018
Student Loan Consolidation

As August comes to close, most college students have already made it to the dorms in preparation for the new year. Perhaps you’ve already secured all the funding you needed. This most likely includes some type of student loan. Paying for college is a giant headache. What you don’t know about student loans can set your child back after they graduate.

There are numerous stories of people who lost out on work because they couldn’t pay their loans. Licenses were stripped and years of hard work went down the drain. It may be an easy decision to help your kid get into the college of his or her dreams, but there are numerous challenges they will face.

Therefore, let’s take a look at several aspects of student loans you may not know.

1) Co-Signers Are on the Hook for Student Loans

It’s an easy decision for parents to do whatever it takes to help their child get into a good school. Many even feel the need to co-sign the loan. Parents should know the massive risk that comes with that. If your child cannot find work after graduating, you are making the payments. You can be sure that the lenders will be coming after you for repayment.

Another tragic story involved the Mason family. Steve and Darnelle Mason’s daughter Lisa dreamed of going to nursing school, so they cosigned a $100,000 private loan. At the age of 27, she died of sudden onset liver failure. Tragically, the lenders went after Steve and Darnelle to pay back what became $200,000 worth of student loan debt, late fees, and interest.

2) Look for Free Money First

Depending on how much money you make, there are tons of grants and scholarships out there. Some aren’t so easy to find, but they do exist. You can find a grant for just about anything these days. Any amount of money you can get to help offset the cost of college is worth the time spend researching and applying.

Also: http://financialhelpers.com/student-loan-debt-is-hurting-the-economy/

You can find grants and scholarships based on religious affiliation, ethnicity, student achievement, financial status, and so much more. The best way to find them is to get those fingers going and search the internet.

3) Set Out a Plan Ahead of Time for Paying Back Student Loans

Here’s one most people don’t think to do. You have no idea what the economic climate will be 4-7 years down the road. The best way to conquer the burden of debt is by being smart and prepared. There are several government programs and institutions that offer student loan forgiveness. Financial Helpers is one such company who is willing to work with you.

The best way to prepare for that day is to work on improving your child’s credit as they go through school. Get a credit card, teach them about fiscal responsibility, and save money. As their credit score improves, they can later refinance their loans.

4) Start Saving ASAP

The best advice is to start saving money for college as soon as they’re born. For those of you whose children are already entering college, it’s a bit too late for this step. But for everyone else looking to be prepared, there are state prepared college accounts you can pay into and use the power of compound interest.

This step not only takes away the student loan equation, but also the additional money paid into interest. Instead, you can use interest for your benefit and not the bank’s. There are other tax benefits as well. Do your research and be prepared!

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