Top Reasons Borrowers Struggle To Repay Student Loans

According to statistics by relevant financial institutions and federal government, a lot of people are struggling to repay their student loans. It is estimated that 45% of borrowers are not repaying their loans. This does not include those currently enrolled and those still enjoying the grace period. A large percentage of these are either defaulters or in delinquent. A lot of people are experiencing struggles with student debt. Why is it difficult for people to repay student loans? Student debt can be overwhelming and immense. The following are the reasons behind the struggles:

Low income

It is estimated that an average college graduate earns about $18 per hour. This is a large percentage decrease from the year 2000. Taking into account living expenses, forms of debt, and grocery bills, borrowers are left with very little to contribute to their student loans.

Underemployment

The Economic Policy Institute Report reports that we are facing the longest and toughest period of economic weakness in over seven decades. In fact, the unemployment rate is estimated to be 72% and underemployment rate at 14.9%. This is an increase of 5% since 2007. This means that graduates have been rendered idle by the economy. Thus, the struggle to pay back student loans is real.

Not understanding federal loan options

After graduation, borrowers are required to be honest about their payment plan and what will work best for all of them. You should note that eligibility payment plans depend on total loan balance and various types of loans you should take out. Also, in some cases, you will take into account the amount you earn. You need to work with the loan services and check various repayment calculators to help you know how much to pay depending on your budget.

Inflexible payment terms

In fact, private loans fall under retail credit category. This means that there are quite a few exceptions and lenders should not offer alternatives or programs, which will alter your loan terms. This means that any form of relief can be given six months to a year. Also, lenders tend to be flexible to accept negotiated terms once defaulting occurs. It is advisable to consult a student loan counselor to assist you to negotiate a settlement for the private student loans.

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A big mistake borrowers make as far as student loan struggles continue is pretending that debt does not exist. You need to remain proactive and staying informed. In this way, you will avoid drastic consequences and ignore your student loans.…