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Student Debt: A Family Affair

Posted By:  |  October 5, 2015  |  0 Comment(s)

Roughly 25 years ago policy makers strongly encouraged hopeful youth to take out large loans to cover the rising cost of higher education, making bold statements that these borrowers will have comfortable jobs with a cushy income once degrees were attained. If it all played out the way policy makers claimed, why is the student loan clock ticking nearer to the 1.3 trillion mark? The picture painted for Generation X is a significantly different piece than what borrowers originally presumed and new research has now provided a sharper image as to why.

student grad caps

During the 1990’s the notion for borrowers was that virtually every degree, regardless of the school or major, would more than pay for itself because college graduates would earn more than enough to provide a comfortable living, explained Peter Cappelli, a management professor at the University of Pennsylvania and the author of “Will College Pay Off?”

Many families, like the one discussed in an NBC News article, are barely scraping by, finding their monthly student loan payments far exceed the price of a monthly grocery bill. One particular family within this piece explains how they are strapped down with a monthly payment of $1,700, while living in an apartment with a blended family of 7.

“More than we spend on groceries and kind of like having a second mortgage,” said Nathan Anderson, a licensed acupuncturist with a total bill of $45,000 split between him and his wife.

The Associated Press exclusively released data analyzing the rising student debt burden belongs to those over 40. The group accounted for 35 percent of all education debt, up from 25 percent in 2004. The data also shows those from 35 to 50 owe nearly as much as new graduates and this group under Generation X are struggling to save the funds required for their children to attend Universities. The average amount saved for their children is a meager $4,000 compared to the $20,000 saved by parents not under the burden of student debt themselves.

Major financial sacrifices have been made by student borrowers, such as putting off buying a home or new car, due to the skyrocketing rate of tuition and the debt accumulated therein. Earnings under a bachelor’s degree have become stagnant, according to data from Georgetown University. Successful high paying careers demanding a graduate degree are further influencing the rising rate of student debt.

Only recently have researchers began exploring the relationship between student debt within the heads of household and the diminutive amount saved for their children.

A survey conducted by Pew Charitable Trusts shines light onto how this circle of debt will influence families on a collective scale.
The $4,000 parents set away for college is barely enough to cover a full year of tuition at many schools, and will cover less than half a semester at a public university. The report released by Pew claimed how this “could fuel an intergenerational legacy of debt.”

Many graduate professionals with high paying careers, such as physicians, are also struggling to get their debts paid down while saving for their children’s tuition. Jonathan Bigler, P.A., writes a check for $2,531 each month for his medical school debt, feeling stressed knowing he will be 72 once the debt is fully repaid.

Poll

  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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