Santa, Can You Pay My Student Loans?
December is a month of mixed feelings for those with student loans from graduating last summer. On the one hand, it’s all egg nog and ‘White Christmas’; on the other, it’s Scrooge and student loan payment deadlines. This is apparently the time of year when college loan lenders call more often, and when you pick up, they don’t sing ‘Jingle Bells’.
Outstanding student loans today total more than $1.2 trillion, surpassing total credit card debt. This is a political and fiscal nightmare waiting to happen.
It is already known that student debt has outpaced everything except mortgage debt here in the US. Students are defaulting on their student loans at a horrifying rate, with one out of every three debts being delinquent, slowing economic recovery in key areas such as mortgage lending. A whole swath of our best and brightest can’t move onto being homeowners, due to their Grinch-like credit!
I can’t help but think that with better analytics and more realistic payment plans, these former students could be helped and achieve a sustainable, long-term plan for paying down these less-than-festive obligations. It is all about timing and understanding the individual while matching their future earnings over their lifetime. Pressing hard for high repayment in the first years after graduation may be a poor strategy, leading to despair and default. The Wise Man (keeping with the Christmas theme) will know that waiting until the individual has become more established in their career will eventually lead to healthy payments and a fully paid debt.
Income-based loan repayment policies are generating a lot of buzz and positive results. I think the wide application of intelligent and analytics based payment schedules that look for positive outcomes over a longer time period could actually deliver that cherished gift from Santa after all.
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