The Current State of Student Loans and Your Credit

By Alexandra Scicchitano

     Student loan debt is at an astronomical number. At this moment, there is more student loan debt than there is credit card debt. 

     According to Student Loan Hero, Americans owe over $1.71 trillion in student loans spread out among 44.7 million borrowers while credit card debt is at $1.03 trillion while there are 196.8 million credit card holders. 

     By this data, it is clear that there are less people who have student loan debt than credit card debt, but people with student loan debt are carrying substantially more. 

    Among the Class of 2019, 69% of college students took out student loans and graduated with an average debt of $29,900. Meanwhile, 14% of their parents took out an average of $37,200 in federal parent PLUS loans.

     According to Forbes, the median income for a household in 1985 was $52,709. In 2018, it was $63,179. The average price for bachelor’s degrees in 1985, was $5,504. Now it is $27,357. 

     Going to college is costing more, but households are not making more money to cover the inflation on degrees. 

     Going to college now is almost impossible without being in debt. Unless you qualify for scholarships and grants that you do not have to pay back, it’s very unlikely to get each semester paid off completely without any debt in the end. 

   According to the Federal Reserve Economic Data, or FRED, as of May 2020, the unemployment rate jumped to 27.4% for 15- to 24-year-olds.  

     Summing up, 44.7 million people are in an average of $29,900 student loan debt. Households that they belong to can’t afford to help them out and also take loans. New graduates cannot find a job but still have student loans to pay back. No job means no money means no paying on any bills. Missing payments on student loans will have your credit taking the hits. 

        According to the Harvard Kennedy School, 51% of students support eliminating tuition and fees for public universities for families that make up to $125,000 a year.

     This would help a lot of people because the median household income in 2018, was less than $65,000. 

       According to NerdWallet, the more overdue your payment, the worse the damage to your credit. For instance, your federal student loan will go into default if you don’t make a payment for 270 days. That will hurt your credit even more than a 30- or 90-day delinquency.

     However, if you can work with your loan servicers, you can make arrangements to pay nothing and not have your credit score go down. You can enroll in deferment or forbearance or sign up for an income-driven repayment plan, or if you already have, modify your payment plan.

     While student loans can help build credit for people able to pay them back through savings or a job, student loans shouldn’t be as big as they are on new of age adults that are having a hard time finding a job. 

     Defaults were halted as part of the pandemic relief measure, however prior to the pandemic, 11.1% of student loans were 90 days or more delinquent or are in default, according to Student Loan Hero. 

     What will happen after the pandemic relief measures are stopped and there are still debts to be paid, but no money to be made for some people who still have not found a job? 

     Your credit will take a hit if you cannot pay your loans. Reach out to us so we can help you manage your credit and keep it up before pandemic relief measures are stopped. 

     Take control of your credit, let us help you do that, D.A.L.S. Credit Solutions & Notary.