I talk a lot about student loans and financial aid in my workshops to students and parents. Although I mostly talk about the different types of federal aid available, I also address the rising costs of college and options for paying back student debt.
Lately, I’ve been getting a lot of questions about student loan debt levels. Earlier this year, the Consumer Financial Protection Bureau reported that student debt has surpassed $1 trillion—which is more than credit card debt.
With this report, many people are talking about student loan debt as the next “bubble” to burst. The last major “bubble” to burst was in 2008 when the housing market collapsed and many homeowners were unable to pay their mortgages and were foreclosed upon. This collapse ruined the economy and caused the Great Recession.
Considering how expensive college is and how much these costs rise on a yearly basis, the student loan debt bubble is definitely something future, current, and past students should be concerned about. Students continue to take on student loans without understanding the long term ramifications of the level of debt and then struggle when it comes time to repay them.
One way to help combat this is to learn about the options for repayment once you graduate. If a student takes out a loan each semester, that could be at least eight loans to repay after graduation. Eight monthly payments can add up quickly. Simply by consolidating your student loans, you can lower your monthly payment and make it more manageable.
There are also options to defer payments and reduce your loan burden. For example, volunteering for programs like Teach for America or the Peace Corps offer options for loan forgiveness and deferment.
If the student loan bubble bursts, it could cause a lot of issues for the recovering economy and for anyone with student loan debt. Hopefully something will be done prior to this bubble bursting that will help students with debt and students considering taking on debt to pay for their education.
What do you think, will the student loan bubble burst?