The State of Student Loan Debt in America Today

Education is an investment in one’s future. It opens doors to greater possibilities. It empowers people to reach their full potential. But for many, college has become an anchor instead of a sail. Crushing student loan debt can hinder a graduate’s ability to focus on the future. Some must choose careers based on salary instead of passion, just so they can handle loan payments. The constant need to earn more money stunts employee loyalty and justifies job-hopping. Even after refinancing student loans, debt still delays graduates from buying homes and starting families.

It’s not just an unfortunate few saddled with student debt. Consider the following statistics:

• More than 44 million Americans currently carry student loan debt.
• The total combined debt is nearly $1.5 trillion. That’s more than the total amount of credit card debt owed.
• Student loan debt is equivalent to 7.6 percent of the U.S. GDP in 2017. To put it another way, retiring the full amount of student loan debt would take 7.6 percent of the value all the goods and services generated in the U.S. economy for a full year.
• The average debtor owes $39,400 in student loans. That’s equal to 70 percent of the median household income in the United States, which is $56,516, according to the 2015 U.S. Census.
• On average, student debt is far greater than the annual salary of a new college graduate. According to the latest Bureau of Labor Statistics, the average American ages 20 to 24 earns just over $28,000 annually. It’s slightly better — $38,400 — for Americans between the ages of 25 and 34. However, that’s still less than the average overall student loan debt.
• According to a 2017 PricewaterhouseCoopers survey, 40 percent of millennial employees have a student loan. Over 80 percent of them say student loans have a moderate or significant impact on their ability to meet financial goals.

New doctors carry an extreme amount of medical school student loan debt. About 75 percent of new doctors in the U.S. graduated with debt in 2017. The average amount is now close to $190,000.

This explains why New York University will now grant all medical students free tuition. That is approximately $55,000 a year per student.

“We thought it was a moral imperative because it’s very difficult for medical students to incur the debt burden of medical school, as well as the additional time burden of training,” Dr. Robert Grossman, dean of NYU School of Medicine, told ABC News.

According to the report, student loan debt can “scare away” students from a career in medicine. It may also prevent graduates from pursuing a lower-paying specialty like pediatrics.

Clearly, there is no quick fix for student loan debt. However, several public and private programs can ease the burden. These initiatives continue to grow as more employers recognize the value of offering financial benefits, such as student loan repayment assistance.

Common student loan assistance programs include:

• The Public Service Loan Forgiveness Program is a federal program designed to forgive student loan debt for employees of certain public and nonprofit jobs.
• The Federal Perkins Loan Cancellation and Discharge forgives a certain percentage of student loan debt after every year of service. There are a number of ways to qualify for this program.
• Both the Pay-As-You-Earn (PAYE) and the Income-Based Repayment (IBR) programs set repayment cap amounts based on income and family size. They also forgive remaining debt after a set number of years of qualifying payments.
• Student loan forgiveness programs designed specific careers such as teachers, nurses, and lawyers.

Public programs may be a great fit for some. But for others, they may actually end up costing more over time. When considering a deferment or forbearance program, make sure you are not accruing additional interest. If so, this will then be capitalized and added to your original principal balance. Programs like IBR can be misleading. They can set graduates up to make payments only towards the interest rate accruing that month. This means they never actually apply to the principal balance of the loan. And it keeps the loan balance the same over time even though payments have been made towards the loan.

Before choosing a program, graduates should crunch the short-term and long-term numbers. It’s easy to get caught up in a program’s immediate impact. After all, you may only need a little breathing room in your budget. However, it’s this lack of knowledge surrounding these programs that is fueling the student loan debt crisis.

In response, more private employers are adding student loan and tuition assistance programs to their benefits packages.

“Employer-sponsored third-party student loan repayment assistance programs are projected to grow quickly in the future,” according to a Consumer Financial Protection Bureau (CFPB) report on student loan repayment assistance programs.

According to a January 2017 WorldatWork survey:

• 4 percent of employers surveyed offer student loan debt repayment assistance.
• 11 percent offer employee scholarships and student aid.
• 23 percent have scholarships available for employees’ children.
• 14 percent offer college savings plans as part of their benefits package.
• 87 percent offer tuition reimbursement to current employees for career development opportunities.

A similar employee benefits survey by the Society of Human Resource Management showed that the number of employers offering student loan repayment programs increased from 3 percent in 2015 to 4 percent in 2017.

In general, the larger the company, the more likely it is to offer employees student aid benefits. Companies can use these programs as a recruiting tool to attract recent graduates.

Still, experts agree there’s much more that needs to be done.

Summarized the CFPB: “Recognizing that significant student debt can have a domino effect on consumers’ financial lives and overall financial wellness, reports suggest an increased interest by both large and small employers in exploring benefits to help their employees pay down student debt or help manage their employees’ student debt stress.” Most of these initiatives are steps in the right direction. However, there is still a long road to recovery ahead for those affected by the student loan debt crisis.

This guest post was authored by Colin Nabity. Colin Nabity is the Chief Executive Officer of LeverageRx, a digital lending and insurance company for healthcare professionals. Through software technology, LeverageRx helps healthcare professionals find better rates on disability insurance, medical malpractice insurance, student loan refinancing and mortgage loans.

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