Impacts of the Student Loan Debt Crisis and What You Need to Know
Since the beginning of the current presidential term the mention of the student loan debt crisis has been prevalent. Politics aside, this issue is something that greatly affects the economy as well as the lives of the people affected by it. But what does that exactly mean?
If you are someone who carries any amount of student debt you certainly know what that means for you in terms of your finances but when you think about the hundreds of thousands of other people that carry that same burden it is obvious to realize that not everyone’s experiences are the same. With so much information swirling around on this topic it can be easy to find yourself confused. Do not let that confusion paralyze you from taking advantage of this opportunity, however. Arm yourself with knowledge and do your best to check every single box as it applies to your understanding of the student loan debt crisis.
Lowering Your Debt on Your Own
Even with the current loan forgiveness that is not enough for many people to become free of their entire amount owed. If you are in that category, you certainly still have options. Refinancing your student loans is a great way to reduce your monthly expenses and interest rates. Consolidating into a new loan means that you will likely be paying less on interest and more on principle, thus reducing your loan faster.
Those who are refinancing student loans with NaviRefi are evidence of just that. It can be very easy to graduate and begin your repayment period and just accept that monthly bill and continue to pay the minimum each month. While there is nothing wrong with this strategy if you are hoping for a more aggressive reduction on your total owed you should strongly consider refinancing.
What Does This Mean for the Economy?
The same way that famous fashion trends or cultural phenomena can impact consumerism and the economy, debt affects it too. The thing with student loan debt however is that it simultaneously provides socioeconomic benefits for students as far as their lives post-graduation while sparking controversy about lending policies. The truth is that without loans most, if not the majority, of college students would not be able to afford their educations. At least not in the traditional, go to college right after high school and study straight through type of style.
The reasons that student loans have been economically acceptable is because they are seen as a means to an end to increase the country’s economic competitiveness in the global market. But in recent years this lending total has completely ballooned to surpass any other type of consumer borrowing. The current recession provoked weak job market has been making repaying those debts a struggle for many borrowers.
Other things like reduced consumer spending, stunted business growth, and housing markets can all be linked back to the student loan debt crisis and are all thing that affect the economy. It might all sound like one giant hamster wheel, and in some cases, it truly is. When borrowers struggle to be able to make ends meet in order to avoid defaulting on their loans there is historically also an increased reliance on social programs which certainly affects the economy.
Understanding Student Loan Forgiveness
It can be really confusing to learn about the Biden administration student loan forgiveness program without running into highly conflicting pieces of information due to the fact that this is a controversial subject. Breaking it down into categories can help you to navigate this plan and understand what it means for you specifically. To be eligible for forgiveness you have to have federal student loans and also earn less than a specific amount of money annually. Meeting this criteria can afford you up to $10,000 in forgiveness. Both direct subsidized and unsubsidized loans are applicable as well as graduate and parent PLUS loans. If you do not know the details about the type of loan, or loans, you can consult a financial advisor to help you determine if the debt you have falls within the criteria.
You will likely need to apply for forgiveness and that is critical to know. Big announcements like this can often get people so excited that they are quick to forget that they need to take actionable steps to take advantage of the benefits. If you owe more than is forgiven you will still be responsible for that remaining balance however you will probably have a new (lower) monthly payment as a result of the decrease in the total amount owed. Do not forget that you will have to account for this forgiveness on your taxes. A CPA or other accounting professional can help you be sure that you are reporting everything correctly and it is probably worth soliciting those services. Federal and state taxes of course are different and while the whole country falls under one federal umbrella the state you live in will determine what forgiveness means for your state tax return.