Student loans get high and this is taking a toll on a lot of graduates. About 18% of the salary of most graduates go to their salary loan payment. Moreover, around 60% of these graduates see that they would be in this situation until they reach their 40s. This is the reason why many of them delay buying a house, a new car or even having a family. There are various reasons on why student loans are bigger now. Students who are going to college and are planning to apply for a student loan may learn from these, as well as find ways to prevent drowning of student debt. Here are some of the reasons why graduates a large percentage of their salary to student loans.
Education Cost Became Higher
In the 1940s, education was affordable for everyone because of the Bill of Rights that was passed. However, this was only until the 1970s. During this period, it was difficult to land a job and the prices, including the education cost, increased. Education cost didn’t decrease since then, but it continuously went up.
Salary Is Lower
While education cost continuously increased, this isn’t the same when it comes to salary. The average salary for employees in fact went down by about 2.2%. People who are just starting to work are on entry level salary and a large amount of it needs to be paid to their student loan.
Not All Graduates Are Financially Literate
Financial literacy is another concern. Many graduates are not completely clear about how student loan payments work. This is why many of them resort to delaying their student loan payment not realizing that their interest is ballooning. It’s too late when they realize that their loan got bigger because of not paying it on time.
If you are a college student or incoming college student who are planning to apply for a student loan, there are things that you could do to avoid drowning in student loan debt.
Know the Terms of Your Loan
This is the first thing that you need to do. You must know the interest rate, how much you need to pay and when you would be paying. Make sure to let your lender know if there are any changes on your status that may affect your loan like if you dropped out of college or if you finish your course early.
Get to Know About How Much You’ll Earn When You Work
Have an idea on the average salary that your target career would earn you when you start working. This is to determine if this would be enough to provide for your needs and at the same time pay for your loans. If the loan is too high for your expected salary, you may want to reconsider your career, course and school that you would be getting in.
Borrow Only the Amount That You Need
Your student loan must only be used for the things that you need for school like tuition fee and books, so borrow only the amount that you would need for this. Your food, travel and other expenses should come from another source like a part time job.
Aside from these things, you should also make sure that you pay your loan on time to prevent it from getting higher because of the interest.
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