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Upon college, the total cost of student loans is about 30,000 dollars. Most students decide to attend college and try their dream careers in the hopes of finding better jobs after they complete their schooling (Schickel, 2016). The careers are intended to help them achieve their life goals. College also provides students with the ability to experience the adult life that they will be forced to live or that they will be required to live. They even get a taste of what their work entails and what the future holds for them. The tables are however gradually turning. The numbers of students who attend the colleges are currently in a decrease each year. The main reason for the decrease is that the coat of college studies are generally high and the loans that they may sort to use and better pay when they complete school have a higher cost. Many of these students have no option but to get into loans to enable them to complete their college studies. However, after completion of their studies, they get several effects from these loans that they have acquired.
The student loan problem is evident as a student is incurring student debt which that are defaulting and this also threatens their future ability to access credit. The approach that students collection have been given are fraught with problems including improper recovery methods and asymmetry of information regarding the available repayment methods. the current policy that has been made available to the public miss the main issues that contribute to the challenge leading to proffered solution that also misses their mark (Schickel, 2016). Some of the problems that have been evident in the loans include representation of averages of the loans yet the amount that is owed by students differs from each of them. This gives the reason why the mandated debt calculators that have been applied by the collector do not solve the issues.
The concerns that have been on the student loans debt have in the recent years spiked and there is a continuous rise in the college tuition fees. In the year 2015, the percentage of the students who had defaulted their loans in two years was at 10%. This is the highest percentages that have been observed in the past two decades according to the information that was given by the department of education (Schickel, 2016). The effects that have been experienced from the loans are that most of the undergraduates are affected with these loans in different ways.
There are both positive effects that students loan cause economically. Economically, the student's loan debts stifle expenditure. Many of the student loan borrowers choose to spend less. In a study that was done by…. It was determined that student loan borrowers can put off purchasing themselves a car due to the loan debt that they have. They also limit their spending during the holidays. The other economic effect is that the student's loans have slowed the housing market. The students' loans have in several situations been observed to hold back the savings that a person could have to purchase a house. Among those that borrow loans for their education have delayed their ownership of homes. There is also a percentage that has not been able to make out of their parents' home. With reduced homebuyers, there is stagnating of the home prices and the homeowners are less likely to build equity in their homes. Student's loans also hold back new homes. Another important factor that is observed in the American economy is the growth of new businesses. More students' debts imply reduced businesses. Among those that have graduated from the universities, one out of five admits that the loans that they took hold them back from starting new businesses.
The loans also affect the economy in the positive side. Through the loans, the students are able to get their degree and also get employed. College degrees raise income after school and also a source of improved living standards. Through the loans, the students are able to get their degree and get employed. This reduces the rate of unemployment. The tax revenues are also increased when the students get employed. The students' loans can be viewed as an investment in the collage educated workforce.
Financial effects of the loans
A credit score is an important aspect t when it comes to obtaining loans. Through student's loans, the score of an individual may be low when the payments are made late. A low credit score also implies that the individual will not have the ability to access financial credit from most of the lenders. The situation may also lead to a person not being able to well manage their finances. Student loans also can make the funds of an individual to be seized by the Fed. In situations that a federal loan has defaulted for more than 270 days, an individual will not have the ability to get a loan clearance from the Fed and they are also exposed to a tax refund for a long period of time. This is due to the fact that the Fed are not able to seize the funds when they default.
The student's loans have made individual forego graduate school. The loans have hindered them since those students who are leaving the undergraduate programs with huge amounts of loan debts cannot and do not have the ability to take out another loan debt to finance their education in the graduate school. The net worth of a person is another important aspect that has been affected by student loans. The net worth of the people that have to pay students loan have been considered are determined to be low as compared to those that do not pay the loans. Their net worth is always low as they have to spend some of their earnings are repaying the loans. Disqualification for a job is another effect that student loan debts have caused. There are organizations that always conduct background checks which also include credit checks. When they conduct the credit checks on the applicants and they realize a given individual is making late loan repayments, they sometimes view the person not to be a potential employee and they might disqualify him for the job.
Those that have students' loans in most situations are not able to pursue their dreams. The loans affect more than the standards of living and the financial independence. It also determines that dream that the individuals pursue. In an example, a person may have the desire to get employed and work for an organization that is not profit based. They have on several occasions abandoned the jobs and work for those that pay so that they have the ability to repay the loans. A person may also have to sacrifice a job that makes them feel fulfilled to look for one that offers a higher salary. The other effect of the debt is that the loans debts do not go away. These loans that are taken by students are different from the other loan debts. For a person who is not able to pay for a house which was taken through a loan can decide to give the home back to the owner. In the loans, there is nothing that a person can return to compensate for the finances that they were given. Once the process is started, it has to be completed.
Effects on relationships
When getting into marriage or in a relationship, it is important to consider that the student loans have vastly affected marriages and made things more complicated in relationships. Adding a student's loan to a relationship makes things get worse. According to a research that was done on marriage and debts, 40 percent of the respondents admitted that they do not marry until they are able to clear their debts (Schickel, 2016). There are those that have also thought that they can marry indent and they combine efforts with the partners to pay up the debt. These have worked and sometimes failed. There are important aspects that one should consider when getting into a relationship or to a marriage with a debt. Some of the factors include the much debt that one is bringing to the table, the income-driven plan used by an individual could change and they have to have a backup plan so that when it fails they have something to do about it, the spouse could be either responsible or irresponsible fir the loans and not being able to jointly consolidate loans.
Mental and physical effects
In a study which was done from the Northwestern University, it was determined that debt is linked to high blood pressure in individuals (King, 2008). The study also reported poor general mental and physical health. The mental health has been affected by the debts as there is stigmatization. Many of the individuals who have the loans will spend most of the time thinking about the way and the means through which they will pay off these debts. This affects them mentally. The physical health has also been affected, the loan repairs in most cases consider paying the debts first before they can look at their physical health and how they will be able to improve it (King, 2008). An individual for an example would not be willing to have balanced died due to the cost and opt to first repay the debts.
Reducing the effects of students loans
Since most of the students do not have options but to get the loans to complete their studies, they need the right strategies through which they can manage the loans and prevent the effects that they may have from them. They are not able to avoid them but they can lower the rate of the loan and in turn reduce the effects. One of the strategies that can be used is refining the loans that students have at a lower rate and or at a long term. In cases where students have multiple loans, one of the strategies that can be used to reduce the effect is to refine and consolidate them to become a single loan. This allows simplifying the loans and the effect that could be obtained from repaying a single loan will be different from paying the multiple loans.
The other strategy that can be used by the students it to enroll in an IBM program to help in lowering the payment and reduce the effects that they feel from making the payments. The program has both long term and short term benefits when it comes to the loan repayment by students. The strategy is great for those undergraduate who are recently employed and have low incomes or those that are uncertain on their future income (Fossey & Bateman, 1998). The programs can provide a great relief to an individual who is already struggling to make their payments currently.
The other strategy to reduce the effects is to discuss the forbearance and defends the options that one has with the lender. When the strategy and is used, it has the ability to offer relief for those that have the loan. When there is the discussion of the deferment of the loan with the lender, a person is given the right time and enough relief on the loans. This reduces the effects that would be got when there was no relief on the loans. The last strategy that can be used to reduce the loans is to attempt debt settlement when a person has private loans. It is unfortunate that borrowers who have private loans have fewer options available for them when it comes to them being for a given when they are compared to those that have federal loans (Rothstein & Rouse, 2011). Debt settlement is, however, a great opportunity for them as it will involve negotiating with the lender on whether to reduce the principle balance or to reduce the payments to be made.
Fossey, R., & Bateman, M. (1998). Condemning students to debt: College loans and public policy. Teachers College Press, PO Box 20, Williston, VT 05495-0020.
King, J. E. (2008). Financing a college education: How it works, how it's changing. IAP.
Millett, C. M. (2003). How undergraduate loan debt affects application and enrollment in graduate or first professional school. The Journal of Higher Education, 74(4), 386-427.
Rothstein, J., & Rouse, C. E. (2011). Constrained after college: Student loans and early-career occupational choices. Journal of Public Economics, 95(1), 149-163.
Schickel, K. (2016). Financial Literacy Education: Simple Solutions to Mitigate a Major Crisis. JL & Educ., 45, 259.
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