How Modern Students Are Dealing with Student Loans
Once they have graduated, most individuals are looking forward to maybe getting married and starting a family
. Unfortunately, most won't be able to afford it. The main reason is the huge size of the debt that many are leaving college with. Most of it in the form of student loans. They are finding that with the huge student load debt hanging over their head, they can't even afford to care for themselves, let alone a child and all the expenses that having a child entails. As a result, it's not unusual to find marriage and baby plans taking a back seat to finding gainful employment and starting a viable career.
Normally, an average college graduate is carries a student loan debt of somewhere in the neighborhood of $23,000. While this is the average, it means that some may be in debt of only around $2,000 while others may owe more than $60,000. So, taking the average, two college graduates getting married could very well enter the marriage with a combined debt of $56,000 before they are even able to start saving money for the down payment on their starter home or transportation to get around in. Fortunately, however, the situation man soon be about to change.
This is because of the newly created Income Based Repayment (IBR) program. This program bases the monthly payment that each lender has to pay on a combination of that person's income plus the number of people in their family. This makes it much easier for a newly graduated couple to begin their post graduate life together without the enormous pressure of those loans hanging over their head. But, the program has a secondary purpose as well.
An untold number of students make the decision to not go to college purely because it is so expensive. Thus, the secondary purpose of the program, in addition to making the lives of post graduate students easier, is to encourage more people to go to college by making it more affordable for them.
So, just what is the practical effect of the program? Because the repayment schedule is predicated on your real income, just as you might expect, the lower your income the less you have to pay. Also, as inflation occurs, these figures will undoubtedly change in the future. But, for now, for example, a person making less than $10,000 a year would not have to pay anything per month.
And someone with an annual income of $25,000 or less would have to make a payment of around $109 a month. Unless that had a spouse. In this case they would only have to pay around $39 a month. Each year the government prints a chart which lists the range of annual income and the approximate monthly payment that you would have to make. But, as you can see, this clearly is a great deal better than the current system of student loan paybacks. This sort of 'pay as you earn' approach, actually allows the graduate to begin to get his life and profession together before he has to pay back the bulk of the loans.
Most agree that, at least in theory, this program sounds like a good idea. However, we have to wait a bit to see how it will actually play out once millions of students become eligible for student loans under the new plan. Will the more lenient rules make the graduates less likely to repay the loans in a timely fashion or more likely? Only time will tell.
How Modern Students Are Dealing with Student Loans
By: David Hoyer
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