Understanding Student Loan Trends

We recently did a blog on income based student loans and how the IRS form 4506-T can be used in the context. This got us intrigued and we set out to find more data on the trends related to student loans. In the process we found some interesting facts. We came across a study “Who Graduates College with Six-Figure Student Loan Debt?” conducted by Mark Kantrowitz, Publisher of Fastweb.com and FinAid.org.
The study looked at information from the National Postsecondary Student Aid Study for the years 1992-93, 1995-96, 1999- 00, 2003-04 and 2007-08 to look at students who graduated with a student loan debt of more than $100,000.
According to the study, the number of students who graduated with a six figure debt has risen alarmingly and is more prevalent among specific groups of students: medium-income students, those graduating from law school and medical school and those graduating in fields with little career growth. Also included are students who borrow from private loan programs.
The study shows that student loan debts have increased 275 percent from 2003 to 2012. As a solution, Kantrowitz recommends that the federal and state governments should stop cutting aids provided for higher education. Also that the loan amount a student can take should be limited based on a projected salary for their respective area of study.
If you have student loans, it is important to plan the repayment smartly. We have come up with a three steps solution to help you plan the approach:

  1. When to startMost student loans have a grace period when you do not have to pay. It usually starts when you graduate or leave school. Find out the duration of your grace period to determine the payment start date.
  2. Understand your repayment optionsMake sure you are clear about the interest rate on your loan; a variable-rate loan might have you paying the same monthly dues between changes in rate.
  3. Calculate how much you need to payDetermine the loan amount and use tools like Payment Calculators to get an estimated amount that you will have to pay. Try to make regular payments and eventually you will be debt free.
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