How student loan debt grew to $1.6T and what can debtholders do to reduce theirs
Student loan debt has surged over the past several years. One expert gives ways to decrease the debt burden. (iStock)
Since 2003, the total national student loan debt surged by 602.5% to nearly $1.7 trillion, according to educationdata.org. Even adjusted for inflation, Americans’ total student debt grew 389.5% in that same time.
The average student loan debt was about $36,900 for the graduating class of 2021, the data showed. That's an average monthly payment of about $433, and an increase of 76% from the graduating class of 2000.
If you have private student loan debt that you are struggling to pay down, consider taking out a student loan refinance to reduce your interest rate. Borrowers can use the monthly savings to create a faster student loan repayment and pay down more toward the principal balance on their loan, rather than pay extra interest. Visit Credible to find your personal rate and see how much you could save.
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How to avoid taking on student debt
As student loan debt grows, there are several steps students can take to avoid taking on additional loans:
In-state college: Go to an in-state college and consider starting with an associate’s degree from a community college. This will save money before transferring to a university. Also, living at home versus on campus can save students thousands of dollars each semester.
Federal loans: Take out loans using a federal direct loan that offers lower interest rates and more flexible payment options and would potentially qualify for any future student debt cancellation. And unsubsized loans do not accrue interest until after graduation. These loans also qualify for benefits such as the COVID-19 related forbearance programs.
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Private loans: While federal student loans have better options available, they also have limits on the loan balance borrowers can take out and not all borrowers qualify. Also, student loan rates are currently at historic lows, making now a great time to take out a private student loan. Borrowers who already have private student loans should consider refinancing to lower their interest rates and reduce their monthly payments.
If you have private student loans and want to view your refinance repayment options, visit Credible to compare interest rates from multiple lenders at once.
Steps to reduce student loan debt
After taking on student debt, student loan borrowers can consider these steps to help reduce their financial burden:
- Refinance the student loan
- Pay more than the minimum
- Sign up for autopay
Refinance the student loan: Refinancing your private student loan allows borrowers to change their loan terms to pay down their debt faster and reduce their interest rates. With interest rates at historic lows, student loan borrowers can lower their monthly payments and pay down the principal balance faster. Visit Credible to get preapproved in minutes without affecting your credit score.
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Pay more than the minimum: Interest accrues on the principal balance of the loan amount, so paying more than the minimum monthly payment reduces the debt quicker and saves borrowers money over the life of the loan. By reducing the principal balance, borrowers reduce the total interest that is built on the loan.
Sign up for autopay: Often, student lenders will give borrowers a discount on their interest rates if they sign up for automatic payments. Borrowers should contact their lender or servicer and ask about discounts for signing up for autopay. They can then apply the additional savings to their principal balance.
If you are looking to pay off your student loan quicker, or just want to save money on your monthly payment, contact Credible to speak to a student loan expert and get all of your questions answered.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.