If you're worried about paying off student loans due to increasing financial difficulty, count yourself lucky. For new students, loans are becoming much more difficult to receive and manage.
First, under the old federal lending program there were plenty of private banks that were able to originate student loans - loans that were backed by Washington. In 2010 this was upended when Congress and the President altered the legislation so that loans were issues directly to borrowers from the department of education. After that, there wasn't much left for private lenders who stood to profit from the interest on student loans.
Second, that change in legislation placed a 3.4% fixed (and subsidized) interest rate on Stafford loans. On July 1st of 2013 that interest rate doubled. The maximum interest rate allowed by the new arrangement is 8.25%. There's really no question that many college graduates come away from school saddled with debt. The media even paints a bleak image of a college graduate, unable to find work, with more than $100,000 in student loan debt.
Why College is Still the Way to Go
Fortunately, this isn't the typical scenario. A Wall Street Journal piece this summer reported that fewer than 1 in 4 college graduates in the U.S. have debt exceeding $30,500. Average student debt at private colleges in 2010 was a bit more than $27,000.
With the increased interest rates, and the inability to file bankruptcy on federal student loans, some individuals fear returning to school and paying off that debt if they can't find work immediately.
What you should realize is that any student loan is a good move when managed correctly. History has shown us that any investment in higher education is indeed a sound one. According to a study from the Economic Policy Institute the average unemployment rate for high school graduates in 2012 was just over 31%. For college graduates, that unemployment rate was only 9%.
In terms of being able to pay off that debt, the U.S. Census reports that lifetime earnings for college graduates exceeds the earnings of high school graduates by more than a million dollars. So while student loans may be more regulated and in some cases more expensive, college is still the way to go.
Invest in your Future
If you are worried about student loans and want to get a job as soon as possible after graduation, then sign up with FirstJob. It’s designed with recent college grads in mind and can help find you a position in order to pay off those loans.