Theory Explained: Why Student Loans will be Hard to Dethrone

Millennials are known for their display of hard work and perseverance. With a college education and technological innovation firmly in their grasp, they have become the ideal employees for organizations across every sector. Unfortunately, these accomplishments didn’t come without a price. This educated lot had to endure a lot more than the previous generations, especially with the increase in college tuition fees.

As per research, millennials have a record of being the most indebted college students in history. The analysis further shows that Americans under the age of 34 had a combined debt of over $600 billion in student loans in 2019. This number will rise dramatically with the current economic circumstances and global recession. For financially inexperienced college graduates, this is an alarming situation. So, it’s essential for all of them to manage their expenses thoroughly and pay off their debts in an efficient manner. In his book, Chadwick’s College Checklist, Charles Chadwick shares different ways college graduates can be vigilant in student loan crises and improve their financial future by cutting down college costs. This article is about helping the future generation of college grads make smart decisions, especially with the current economy in shambles.

Understanding How Student Loans Work

Countless people around you think that a college education is for the privileged. With the increase in tuition fees, this kind of mindset is understandable. Sadly, a person without a college education has access to limited job opportunities, which can further deteriorate their financial standing. Consequently, if you do consider going to college, student loans can take up years of your money-earning days. So, if you want to secure a financial future without wasting good years paying off student loans, you must understand how they work.

Loans like these fill financial gaps and offer funds to cover an individual’s educational expenses. But as an aspiring student with future goals, you must fully understand the application, disbursement, and repayment process associated with student loans. Remember, you’re investing in yourself. You are responsible for funding your education and paying off loans as quickly as possible.

Note that degree-seekers like yourselves can apply to public colleges and universities by acquiring federal financial aid and student loans per the government’s policy. Students can also apply for private loans, but the terms are different. We want to point out that not all student loans are alike and can sometimes be confusing. So, do your homework before taking this step, as this could make or break your entire life.

Ways that Student Loans Can Impact You

Students who graduate with heaps of loans under their name would feel the pressure after they graduate. This pressure can be severely harmful to the graduate who has only stepped foot in the professional world, but his initial goal is to pay off debts. Factors like stress and anxiety can be fatal. Experts suggest that before you take up the loan, make sure that you understand how it can affect your life.

May Rush into Employment

One of the most common ways student loans can cause problems is by forcing one into employment that does not meet their requirements. After all, if you’re in debt, you must pay your monthly bills, depending on the amount you borrowed. This could lead many students to opt for jobs that pay less, or any job for that matter, by either compromising their dream career or a job to help secure their professional future. Also, a student’s wages could be garnished

The American Student Association reported that over 50% of graduates agreed that the pressure of paying off student loans hampered their professional journey. But student loans have become a necessity for most students in the country; it’s best to consider different career options. Psychologically speaking, if individuals focus on their dream jobs, they can excel quickly and improve their chances of promotion. Also, Charles, in an interview, suggests that one of the consequences of your loan being in default is that your wages may end up being garnished. In other words, your employer might hold a fraction of your income and send it to your loan holder to repay the defaulted loan.

Lowering Net Worth

Only a handful of students graduate college with a huge net worth, while graduates who acquired student loans have a negative net worth. That negatively impacts their mental health. But what does low net worth really mean for young graduates? Negative net worth simply means that you can’t make large purchases. On top of that, your credit score and the weight of debt would make it impossible for you to qualify for other loans.

So, before you find yourself in need of making a big purchase like a wedding ring, perhaps, make sure that your college debts are paid off. Charles Chadwick, in his book, shares different results-focused methods and steps to help you cut down college costs to effectively pay off student debts before you make a huge purchase.

Poor Credit Scores

We discussed poor credit scores in the previous section, but let us elaborate on the plot further. Mind you that your credit score can considerably impact your financial life. Financial experts suggest that paying off your student loans on time can help you build a good credit score. Consequently, missing payments can significantly damage it.

Since most students are loan borrowers, they find it hard to make payments. Their average credit scores are lower than the national average, which is 656, compared to 711 for everyone else. This is a huge difference and can potentially take graduates years to rebuild this credit after missing payments.

Can the Student Loan Crisis Ever Be Resolved?

With the global economy in dire need of a miracle, crises on the national level like student loan debt continue to worsen the situation. We hear news about the college tuition crisis every day, but are we doing anything to resolve this crisis? Perhaps, this could take years, maybe decades, to resolve. Did you know that the current student debt has exceeded $1 trillion? This accumulated value far exceeds car loans and even credit card debt. So, no matter how you look at it, this is a crisis for the borrowers and the federal government.

The current United States President, Joe Biden, has proposed to make college tuition-free so that it can benefit students with lowered income. These aspiring students don’t have the finances to reduce overall borrowing. That’s why education advocates are calling for tuition-free four-year programs as well. But the tuition-free arrangement doesn’t include living expenses on and off campus. Still, it could take years to bring changes, but what about the students who want to acquire a college education? We have enlisted some possible solutions for you.

Changing Opinions on Community Colleges

People take community colleges relatively lightly, but they can be helpful for high school graduates. For starters, they can prepare students for the academic pressure that college students usually face. Since community colleges offer two-year programs, students can work and study and prepare themselves for professional life.

Further, enrolling in a community college doesn’t deny you an opportunity to get into your dream IVY school. In fact, it will improve your chances to transfer your courses there and continue the remaining part of your four-year program in a well-reputed institute. The best part about enrolling in a community college is that you can secure a scholarship and save up when transferring your courses elsewhere.

Charles Chadwick shares that he received his earlier education from a community college. It helped him secure his finances and for tough college life before it started. Further, he was also able to explore his options and choose a degree, and earned construction certifications that were most beneficial for his professional growth. So, if you’re thinking of ways to minimize your student loans, community college can be a great start.

Pay More than Minimum Each Month

The most efficient way to pay off student loans quicker than the due date is to pay ahead of schedule and more than the minimum amount. Initially, you may find it difficult ,because you just started earning an income and have to pay off debts. This can feel like a punch in the gut and is definitely a bitter pill to swallow. Unfortunately, paying off an extra amount isn’t a simple ask. Most loan service officers adjust your additional payments in their own way. So, you have to ensure that the additional amount you have paid goes in the right direction.

Revise Your Repayment Plan

If you want to pay off your student loans faster, try revising your repayment plan into shorter terms. These terms usually result in a higher monthly plan, but you must ensure you can afford the new amount. Remember, federal student loan borrowers can access different repayment plans. All you have to do is log on to your FSA account to see what plan you’re currently enrolled in and switch to the shortest version.

Use Windfalls

Most college graduates wish to become debt-free as soon as possible, but are unaware of the options. For instance, you can divert your windfalls toward your student loans. Windfalls are unexpected cash returns like tax refunds, work bonuses, and inheritances. Anytime you get a good amount of money you weren’t counting on, that counts as a windfall.

With the windfall amount, you can decide how much you want to allocate towards your loans. This is a crucial time, so try not to get overpowered by the extra income and cover immediate necessities like paying off student loans, your priority.

Refinancing Options

Most finance students are quite sharp in this regard, because they have studied how interest rates and debt repayment works. But even if you’re not, this can be a good option. For instance, you can pay off student loans with a high-interest rate through refinancing options. It means you can switch to a new lender offering a lower interest rate on loan.

The only downside to this option is when you’re acquiring federal loans. When you refinance them, they lose all their benefits, including an income-driven repayment plan. Further, you’re no longer eligible for loan forgiveness programs and forbearance periods.

How can Charles Chadwick Help You?

Charles Chadwick has experienced everything and has come out on top through simple, but effective measures. His book, Chadwick’s College Checklist, is a guide that could potentially transform your future. In his book, he shares his experience and the struggles anyone faces while considering a four-year college degree. But you shouldn’t keep all your eggs in the same basket. Charles wants to help aspiring young adults plan ahead by suggesting different options. They can only pay off their student loans quickly and live a good debt-free life. So, order your copy of Charles’ book from Amazon today.

Bottom Line

Two elements, home ownership, and college education, are both parts of the American dream. Every individual who graduates high school strives hard to achieve both of that. However, fostering both of them at the same time can be impossible for most people. In times like this, one might think that tuition-free college education can be the answer, as suggested by Joe Biden. However, for now, those who want to enroll in the next session shouldn’t wait for Joe Biden and start prepping themselves.