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Financial Ignorance or Soaring College Costs



December 5th, 2013 by in Finance with 68 Views

It’s an open secret that the United States of America is ploughing through a burgeoning student loan debt crisis. Among the $1.2 trillion worth of student loan debt, nearly 1/3rd of the student borrowers are either in deferment, default or are requesting to have their payments postponed, as per analysis by the CFPB or the Consumer Financial Protection Bureau. Other reports suggest that the amount of student loan debt for the graduates of the public colleges has increased 29% over the past 3 years and this is a huge increase in a nation that is already saddling with the soaring student loan debt level. The state of Massachusetts has struggled to meet with its own financial challenges and the colleges and universities couldn’t keep up with the rising costs and growing enrollments.

debt

The financially needy students, when they find out that there is someone who can give them $18,000 without even a co-signer, they get excited and therefore take out loans beyond their affordability. They fail to calculate the monthly student loan installments and the biggest mistake that they do is to find out later how much they’ve owed on the loan. They say ignorance is bliss but this is not true when it comes to the soaring student loan debt in the nation. Many students are making such financial mistakes and this is why the experts say that the student loan debt crisis isn’t only being fueled by the outrageously high tuition fees or a weak job market. An increasingly large number of students are ignoring their financial issues. In most cases, the students barely comprehend the liabilities that they owe.

The college and university students in the US have graduated with an average debt of $26,000, both on government student loans and private loans in the year 2012, as per figures released by the non-profit institute for College Access and Success’ project on Student loan debt. In fact, what is adding to the sea of student loan debt in the nation is the loans from the private lenders, which charge considerably higher interest rates than the federal counterparts.

The federal loans usually have fixed rates throughout the term of the loan and are also generous enough to offer flexible repayment options when the borrower is in debt. On the other hand, the private student loans carry variable interest rates and they’re even given to people without a cosigner. The student loan borrowers are of the opinion that the federal government once cared for the financially needy borrowers. But now the entire middle-class is being priced out of an education. The tuition costs have gone through a 300% rise and they’ve even outpaced the health care costs, mortgage rates and even the Wall Street. The biggest issue with the state-run colleges is the increases in their tuition costs and they’ve also gone through budget cuts. The students who have enrolled themselves in the private colleges are the ones who have been wondering about their fate in the near future.

An increasingly large number of students are careless about their finances and most of them are the out-of-state students who have moved out of their homes and are staying on their own. While most students are not very careful about their personal finances, there are many parents who haven’t shared much worthy fiscal information with their kids before bidding them goodbye. Students don’t save money, they live beyond their means, they spend the major portion of their income in getting things that they can do without, they keep whipping their plastics unnecessarily and they often blindly follow their extravagant and spendthrift friends or roommates.

Debt aversion among the college students, especially the low-income students, is directly linked to lower participation in higher education. If you’re someone who doesn’t want to contribute towards the spurring student loan debt crisis, you should take the required steps through which you can avoid incurring debt. Take help of the US Department of Education in getting some affordable repayment plans through which you can opt for immediate debt reduction and get back on the right financial track.