Student Loan Debt Reaches Record High
Student loans reached a record high national total of $1.5 trillion. While that may signal alarms for many, it’s important to know what that number includes and what it represents. Ameritech Financial is a document preparation company that helps federal student loan borrowers understand and apply for federal repayment plans. The company reminds borrowers that high totals do not necessarily mean the student loan system is in crisis.
“The issues surrounding student loans are not simple enough to label them a crisis based on a single number,” said Tom Knickerbocker, executive vice president of Ameritech Financial. “Borrowers have their own balances, income and other mitigating factors that influence their ability to pay their loans. Most of them are able to manage their loans, despite the alarming national milestones.”
The national student loan debt has increased dramatically in the past decade, just as it increased in the decade before that. But that does not necessarily mean that borrowers cannot pay down those loans. The totals may simply represent higher college attendance, including those who are in college now. It is still true that a college degree can increase lifetime earning potentials. While students graduate with increasing balances each year, high balances do not necessarily equate to an inability to stay current on those loans. In fact, borrowers with smaller balances, and often no degree, default at higher rates than those with higher balances.
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The national $1.5 trillion includes the current balances held by borrowers. Such balances represent original borrowed amounts as well as interest that has accrued in the meantime. Borrowers in federal income-driven repayment plans (IDRs) may have payments less than the interest that accrues each month, which can drive up balances. However, such plans make loans more affordable for many borrowers with low income, high payments and/or large families. Though IDRs may inflate the debt numbers, they can reduce default and delinquency rates.
“One might argue that the high national total is good because it shows that people are going to college and working toward a better future,” said Knickerbocker. “It could also mean that borrowers are being responsible in repayment, enrolling in IDRs to be able to afford their loans despite high Standard repayment amounts. Without more data specifically highlighting the increase or decrease in default rates and interest accruing, the high amount of student loan debt only provides so much information. Either way, at Ameritech Financial, we help borrowers understand IDRs and apply for them if they believe they would benefit from such a program.”
Ameritech Financial is a private company located in Rohnert Park, California. Ameritech Financial has already helped thousands of consumers with financial analysis and student loan document preparation to apply for federal student loan repayment programs offered through the Department of Education.
