10 Major Problems With Complete Student Loan Debt

10 Major Problems With Complete Student Loan Debt

10 Major Problems With Complete Student Loan Debt

Even though you might have to take out a student loan in order to cover the entire cost of your education, you must carefully consider how you will spend the funds you are given.

It’s critical to borrow as little as possible and to match your loan to your expenses. If not, improper financial management could seriously harm your life.

One of the biggest types of consumer borrowing in the US today is student loan debt, which has increased significantly in recent years.

Even though a college education usually pays off in the long run, many recent graduates worry that having debt could hurt their ability to make enough to survive financially and worry that they will be joining a weak job market.

Over 80% of debtors who went into default said that this had resulted in at least one more consequence. However, these 10 scenarios demonstrate how having student loan debt may have a detrimental impact on your life.

10 Major Problems With Complete Student Loan Debt
10 Major Problems With Complete Student Loan Debt

1. Damage to Credit Score

The most common implications are a decrease in your credit score (62%) and the inability to get future federal financial aid (37%). Collection costs and penalties were the next most prevalent impacts.

Student loans are handled by the major credit bureaus much like any other kind of installment loan. Your FICO score might drop if payments are not made on time.

You are classified as being more at risk if your credit score is lower. Because of this, lenders are less inclined to provide you credit for things like mortgages or auto loans.

Lenders may only approve you for loans with higher interest rates if you have a lower credit score, which might raise the overall cost of your borrowing.

You can pay more for insurance because credit ratings are also used by insurance companies to set insurance premiums.

2. Rejection for Employment

Employment reports can involve a criminal background check and a search of public records, which would reveal any court filings or bankruptcy filings, in addition to a candidate’s employment history.

Rejection is one of the common major problems with complete student loan debt because companies routinely run credit checks as part of background checks when you apply for a job, particularly if you’re seeking for a position in the financial sector.

They can examine your credit report as part of the background check procedure, even if they are not granted access to your credit score throughout the vetting process.

You should anticipate that potential employers will review this information and may use it against you if you are behind on your student loan payments.

3. Career Goals Push back

Your ability to pursue certain career ambitions may be impacted by student loan debt. If a career with a better wage will enable you to pay off your debts, including your student loan debt, you might have to give up a job that gives you greater joy and purpose.

But that is a minor sacrifice so long as your debt will be repaid through the good paying job you have in hand, and it is never late to integrate the passion with the resourceful work yo have on ground.

4. Decreased Net Worth

Your net worth is increased by your possessions, such as your house and investments. Your net worth is reduced by your liabilities, which include debt from credit cards, outstanding mortgages, and other loans.

Because student loans are a liability until they are paid off, the more you owe on them, the lower your net worth. Your total net worth is reduced when you have student loan debt. Both your assets and liabilities are taken into account when determining your net worth.

5. Long-Term Debt

You should always remember that in bankruptcy court, student loans are rarely discharged, this is why permanent debt is a threat and a major among the major problems with complete student loan debt.

Depending on your unique situation, you might be eligible for student loan forgiveness.

Unsecured debt, such as student loan debt, usually cannot be eliminated through bankruptcy. You will still be in charge of repaying student loans.

If you default on a secured obligation, the lender may take your house or vehicle as collateral to cover their losses.

6. Effects on Grad Schools

When deciding whether or not to pursue graduate school, consider your existing debt burden as well as the expenses and chances of earning a certain amount in your field after graduation.

Many times, students who graduate from their undergraduate degrees with substantial debts are unable to afford to take out another large loan to go graduate school. That implies delaying or forgoing graduate school.

The cost of graduate education may vary depending on your chosen professional choice. As per the National Association of Colleges and Employers, the average beginning salary for a computer and information sciences major in the class of 2022 was $86,964 for a bachelor’s degree and $105,894 for a master’s degree.

7. Home Buying Challenges

When making the decision to approve you for a mortgage, lenders take into account several financial variables. Your debt-to-income ratio is one of these. Your ability to buy a home may be seriously restricted by having too much student loan debt.

A lender will probably deny your loan application if they determine that your debt load is too great for you to make extra mortgage payments each month.

Funding your student loans could make it more difficult for you to save the needed minimum down payment that many lenders demand.

8. Renting Challenges

Some borrowers who are heavily indebted to school loans are unable to pay for even the most basic accommodation, particularly if they stay in expensive areas.

Landlords take affordability into account, just like lenders do. They’ll probably run a credit check on you to see if you’ll be a reliable renter.

9. Financial Assets Seizure

In order to assist with loan repayment, the federal government may potentially seize up to 15% of your income. This implies a mojor problem with complete student loan debt.

Also, you might not receive a state or federal tax refund for a considerable amount of time if you have a federal debt that is past due by more than 270 days.

However, this is because, should you ever to fail on your loan, the federal government may take possession of this money.

It may also accept any other form of payment from the government that you are entitled to, including Social Security benefits.

10 Major Problems With Complete Student Loan Debt
10 Major Problems With Complete Student Loan Debt

10. An Increased Rate of Default

The U.S. Department of Education states that students who borrow for college but never complete their degree are three times more likely to default on their loans than those who do.

Failure to make timely payments is the result of defaulting on a debt, be it student loans or any other debt. It becomes delinquent after a given amount of time. Unless you pay that amount and bring your account up to date, you will continue to be in default.

However, there are ways you can easily relieve your student loan debt in a blink of an eye but you need to be very focus and give emphasis on each and every proceedure.

Check Out PBS News Hour Reports On Student Loans: More Debt, More Defaults, More Problebs overview video from YouTube below:

Ways To Relieve Your Student Loan Debt Easily In 2024

Which are:

1. Calculate Your Total Debt

2. Understand The Terms

3. Examine The Grace Periods

4. Apply the Avalanche Debt Strategy

5. Understand What Makes Student Loans Unique

6. Magnify Your Payments

7. Pay Down Principal

8. Make an Automatic Payment

9. Explore Defer Payments

10. Request Payment From Your Employer

11. Use Refinancing To Your Advantage

12. Find Loan Forgiveness

13. Consider Consolidation

14. Sign Up In an Income-Driven Repayment Plan

15. File for Bankruptcy

Answers You Need To have On Complete Student Loan Debt As A Student

1. How much debt do students have?

During the past 20 years, student loan debt has more than doubled. About 44 million American borrowers owed a total of more than $1.6 trillion in federal student loan debt as of March 2023.

With additional private loans, the total exceeds $1.7 trillion, surpassing both credit card debt and vehicle loans. With over $12 trillion in debt, only residential mortgage debt is greater.

2. Who is responsible for it?

As of May 2022, borrowers attending two- or four-year colleges or universities owed almost half of the outstanding student debt; graduate school borrowers owed the remaining balance.

Even though most students graduate with debts around $20,000, a tiny percentage of borrowers have a disproportionate amount of student loan debt.

The 7% of borrowers who owe more than $100,000 hold more than one-third of the overall debt. However, because bigger debt from graduate or professional degrees can pay off with significantly higher salaries, borrowers with lower amounts of debt typically find it more difficult to repay their loans.

3. Why do college students acquire debt?

The majority of students in the United States are motivated to borrow since the highest-paying jobs usually need a college degree.

According to the U.S. Bureau of Labor Statistics, workers with bachelor’s degrees make 1.8 times as much as those with only a high school diploma, while workers with professional or doctorate degrees make more than twice as much.

4. What is the reason for government loans to students?

Through research grants, veteran’s benefits, student loan programs, and need-based tuition grants, the U.S. government supports higher education for its citizens because it recognizes that a highly educated and skilled labor force is essential to the country’s economic growth.

Workers with higher levels of education pay more taxes, are typically more productive and involved in the community, and depend less on social services.

Furthermore, the majority of experts believe that postsecondary education is essential to a creative and dynamic economy.

5. What is the argument that’s going on now?

Both the growing expense of higher education and the current loan volume require attention, according to a large number of professionals and legislators.

They admit that rising student debt is making racial disparity worse and hurting the next generation of students by keeping them from achieving their financial objectives.

They contend that whereas earlier generations were typically able to find occupations that allowed them to pay off their debts or pay for school, this is no longer the case for more recent generations.

6. What is Biden suggesting?

A historic executive order to cancel up to $20,000 in student loan debt for Pell grant applicants and up to $10,000 for non-recipients who earn less than $125,000 annually was put forth by Biden in 2022.

It was anticipated that over forty million borrowers would benefit from the scheme, with roughly half receiving a complete debt forgiveness.

The proposal would have eliminated $441 billion in debt in total, or nearly one-third of the federal government’s total amount of student loan holdings.

Over the course of the following thirty years, the impartial Congressional Budget Office projected that the cancellations would cost more than $400 billion.

Critics who saw the initiative as an inflationary burden on taxpayers fiercely opposed the cost.

The plan was overturned by the Supreme Court in June 2023, voting 6-3 against it, finding that the president lacked the statutory authority to forgive student loan debt.

Biden responded by announcing a new, more modest plan to lower student loan debt in the United States. Under the so-called SAVE plan, undergraduate loan borrowers will have their monthly payments halved, and depending on their earning level, the loan balances will be canceled after ten or twenty years of payments.

Though some analysts predict decreased repayment rates, the White House expects the plan to allow borrowers to repay $0.71 for every dollar borrowed.

The program’s estimated cost varies, with some estimates putting it even higher than the original debt forgiveness plan.

Student Loan Crisis

Using recently released U.S. Department of Education administrative data on federal student borrowing connected to earnings records generated from tax records, the U.S. Department of the Treasury and Stanford’s Constantine investigate the surge in student loan delinquency and default.

The sample provides information on student characteristics, institutions attended, loan amount, and post-loan outcomes.

It comprises 4 percent of all federal student borrowers since 1970, or approximately 46 million annual updates on 4 million borrowers derived from hundreds of millions of individual records.

Much of the recent doubling in default rates can be attributed to greater enrolment in for-profit colleges and higher borrowing rates among community college students; changes in the types of schools attended, debt loads, and outcomes for non-traditional borrowers in the job market explain the change.

According to the assessment, these students took out large loans to attend universities with low graduation rates. They also indicate that after enrolling, they had bad job market outcomes, which made it impossible for them to pay off their debt.

Among those who dropped out of school during or shortly after the recession, over 25% would default on their debts in less than three years.

For instance, the median borrower from a for-profit college who graduated in 2011 and secured employment in 2013 made roughly $20,900; but, more than one in five (21%) did not have a job; in comparison, comparable borrowers from community colleges made $23,900, and almost one in six (17%) did not have a job.

Concurrently, the median loan balances of non-traditional borrowers increased by nearly 40% (from $7,500 to $10,500) for for-profit borrowers and roughly 35% (from $7,100 to $9,600) for borrowers with a two-year loan term.

These increases were attributed to factors such as increased eligibility and need for financial aid, higher loan limits, reductions in state aid, the impact of the recession on household finances, and higher tuition costs.

Compared to borrowers from 4-year public and private schools or graduate borrowers, these debt rises were significantly higher for non-traditional borrowers.


For your success to minimize and avoid these major problems with complete student loan debt, you need to make sure you understand the implications of borrowing money before taking out a loan, and only borrow what you need.

Before you borrow, make a repayment plan that takes into account your expected earnings for the professions you are interested in after graduation.

If you can responsibly manage your payments, student debt may be worth it. Taking out a student loan can assist you in obtaining a degree, which can lead to more career options, including higher-paying positions.

However, student loan debt might not be worthwhile if you drop out of school or don’t get a higher paid job.


What are the effects of student debt?

About 50% of borrowers with student loan debt claim that their debt has affected the decisions they have made in life. A third (33%) claim that it has affected their capacity to pursue higher education, and 14% claim that it has affected their choice to begin a family.

What is a solution to student loan debt?

Think about consolidating your loans. Check to see if you qualify for a better payment plan, student debt forgiveness, or a deferment on your loans.

Boost Your Income: Although you probably won’t be able to earn a raise at your first job right away, you might be able to work overtime. You might also take a part-time work or launch a side business.

Why is it so hard to pay off student loans?

Interest is the maojor reason. Repaying student loans involves more than just paying back the total amount borrowed.

For instance, by the time you pay off your student debt due to accumulated interest, you’ll often have spent far more than $20,000 if you take out $20,000 in loans.

Is student loan debt a market failure?

YES! There are profitable investments to be made, but private lenders cannot or will not offer these loans, just as they will not issue other unsecured loans, like credit cards, and will instead demand higher interest rates. This is an example of a market failure.

How student loans affect the economy?

Because student loan balances keep borrowers from pursuing other financial goals, like purchasing a home or a car, they can have a big effect on the economy. Student loan debt reduces customers’ disposable income, which in turn prevents them from spending.

Does student debt go away?

Although undesirable details regarding your student loans can vanish from your credit reports after seven years, the loans themselves will stay with you throughout your life unless you settle them.

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