About 30% of respondents to a U.S. News survey in July say they owe more than $30,000 in student loans. Unfortunately, though almost a quarter owe $10,000 or less, some owe much more. More than 11% say they are paying off more than $50,000 in student loans.
What many former students are facing -- no matter how large or small their debt is -- is spending years trying to pay off these loans. Respondents were asked how long they've been making student loan payments, and here are the findings:
-- Almost two-thirds have spent five years or less making payments.
-- Nearly 21% have spent six to 10 years paying on student loans.
-- Close to 9% have been paying loans for 11 to 15 years.
-- More than 5% have spent more than 15 years making student loan payments.
Given the length of time, it's not surprising that nearly 38% have postponed buying a home and about 20% say they've put off getting married due to the financial burden of student loans.
Are Borrowers Ready to Start Making Federal Student Loan Payments Again?
Unless government action is taken to extend it, the pandemic-related freeze on federal student loan repayments is set to end on Sept. 30, 2021. Respondents were asked whether they are ready to start repaying their loans again, and here's how those with federal loans responded:
-- More than 35% say they'd be able to pay bills and student loans.
-- More than 41% say they'd barely get by and would need to decrease discretionary spending to make ends meet.
-- About 23% say they'd be unable to make payments without finding a new source of income.
When survey respondents were asked if they'd taken any steps to make paying their federal loans a little easier, a quarter say they haven't done anything.
Of those with federal loans who have taken concrete steps to improve their situations, here are the strategies used:
-- More than 27% have applied for deferment or forbearance.
-- About 28% had applied for income-based repayment forgiveness.
-- About 27% had applied for a pay-as-you-earn repayment plan.
-- More than 17% were working in a profession where student loans are forgiven.
Almost half of respondents have only federal loans, and more than a third have a mix of federal and private loans. About 17% have only private loans.
Here are the strategies used by those with private loans:
-- Nearly 30% refinanced their student loans.
-- Less than 29% consolidated their loans.
-- Around 42% hadn't done anything to make repayment easier.
[Read: Best Private Student Loans.]
Some Regret Their College and Student Loans Decisions
As always, hindsight is 20/20. When it comes to student loans, which can get complicated, it's often difficult to see the consequences of taking on long-term debt. Still, more than 28% say they'd make the same decisions about their school choices and getting student loans.
But others would like a do-over. Here's what the survey shows:
-- More than 19% say they'd go to a less expensive school.
-- Almost 23% would still go to the same school but pay for it a different way.
-- About 15% say they'd still go to college but not take out any loans.
-- More than 14% say they'd skip college altogether.
That so many wouldn't even attend college if they could go back in time clearly shows that high school students need more information so they can make the best choices for their future.
How to Help Students Make Informed Loan Decisions
The survey shows that many former students regret the decisions they made regarding school choice and loan amounts. It's essential for parents, high schools and community organizations to educate high schoolers so they understand the life consequences of taking on student loan debt.
Here are five ways to help young adults make knowledgeable decisions:
-- Talk about community colleges. Almost one in five regret going to an expensive school. Make sure students understand that they can save money during the first two years by attending a community college. After that, they can transfer to their desired college to take the major courses in their chosen field.
-- Show them the numbers. Make sure they understand the concept of opportunity cost. For example, if they graduate with $30,000 in loans, monthly payments will take years. This will impact their budget, and they may have to forgo major purchases until they're making a higher salary.
-- Research average salaries. It's fine to encourage young people to choose a career that makes them happy. But you also need to add a dose of fiscal reality. Help them research salaries in their chosen field. If they still want to get loans, they'll be making informed decisions.
-- Encourage them to cap the amount of loans. As a general rule, I recommend that the total amount of loans not exceed the average first-year starting salary in your field.
-- Explore trade schools. The college experience isn't for everyone. Many individuals thrive financially by choosing a trade or vocation that interests them. For example, there are programs designed to help build careers in web design and development, video game design, massage therapy, health care, carpentry, welding, and much more.