Easy accessibility, responsible for skyrocketing student loans.
Anisha, 27 year old lawyer, has total of approximately $220000 to pay back in student loan. The young girl who always wanted to make her career in law, is the first in her family to get a college degree. After completion of her studies she is now drowning in money problem, even after being so educated.
She is in complete stress to get the short end of the stick. She is not able to enjoy, probably the best part of her life, and always has the second thought, “whether to spend or not” and how will she repay such a huge amount. First of all the fact that someone could get $220000 for student loans is a hard to believe thing. Just like most of the young aspiring students,when she decided to borrow from bank, for her studies, she was totally unaware of the loans, finances and the situation she was getting into, and was not even guided by the college financial aid office. No one told her that the amount she is taking is something she might not be able to repay. She is now expected to pay $1200 per month under standard repayment plan, which is very difficult if you want to maintain a good standard while paying back the loan. She has now decided to work for a bigger firm and make as much money as she can, by working may be 7 days a week.
Is Anisha the only victim of poorly managed student loan system? No, there are many other borrowers who believe that getting student loans was the worst financial decision they have ever made , since in absence of a proper guidance, its negative effects may stay with them forever.
For youngsters who are about to roll into college, financial matters don’t even appear in their distant thoughts. They tend to go with the flow, having dreams of their career in mind. They underestimate the possible consequences of their financial decisions in a system, in which it is easy to obtain a loan, and very difficult to pay it back. The sad part is that, even the responsible officials who know the process and the consequences of borrowing huge amounts from bank, do not realize the need for advising students on these matters. Because of very few or almost no credit checks by the lenders, people are sometimes borrowing blindly for their personal use as well. At the time of graduation, people often find themselves having a student loan balance higher than their tuition fee for full course. There are also people who don’t even roughly know about the size of their loans.
Federal student loans are the most easy to attain loans. You just have to fill out the free FAFSA application, and you are ready to receive the loan. Government lends money, without even analyzing whether the borrower will be able to pay them back, or not. Although generally the loan amount one can qualify for highly depends upon the profession of the borrower, it is not the criterion in the federal student loan system. A person studying software engineering will be able to handle a debt of $50,000 differently then a person pursuing a career in social work. Students with such variety of earning potentials are borrowing the same amounts of money, since the tuition amounts are not specified based on future income potentials of different fields of study. It is even difficult to put a cap over the loan amount one can borrow, as it may close the only route towards higher education for many students. In this case the only solution left for borrowers might be to get expert advice before applying for loans , choose the best possible way to repay their loans, and track their payments to avoid defaults, which might also need expert assistance.