Americans owe $1.5 trillion in student loan debt. The average student owes nearly $37,000 when they graduate from college. Shane King owed $36,000 when he graduated from Auburn.
“Got down there and didn’t realize the cost of living,” King said.
The GI Bill covered his tuition, but he still had living expenses to cover. He tried to work three jobs to provide for his family while going to school. He couldn’t keep up with work and his studies, so he took out a student loan. It was a low interest loan he could pay back after school, he said.
Fifteen years later, King still owes $34,000.
“All we’ve pretty much been paying is interest,” he said.
Interest on his loan accrued when he received forbearance – a break on his loan payments when his family fell on tough times. A look at his bill shows 65 percent of his monthly payment goes toward interest.
“We didn’t realize how much we paid for interest, and the principal has not moved,” King said.
He’s not alone. Ebony McKathren owed $27,000 when she graduated from Alabama State University. She has barely made a dent in her debt. She graduated in 2005 and still owes $21,000.
McKathren tells us, “I got my house in 2007; I’ve paid 20,000 of my house already. With my student loans, I haven’t gotten anywhere.”
Financial experts say there are tricks that will help you to pay off your loans faster:
- Pay more than the minimum each month. Make sure the extra goes toward the principal.
- Refinance your loan. Shop around for a lower interest rate and if possible, shorten the term of the loan.
- Take tax deductions. You can deduct student loan interest on your tax return.
Even with those measures, for many the payments prove unmanageable. By 2023, nearly 40 percent of borrowers are expected to default on their student loans.
“We need to realize that it’s not just, ‘Oh, if only students didn’t have to borrow money.’ That’s not the problem, it’s the particular issues that need to be addressed,” said Sanda Baum with the Urban Institute, a progressive think tank in Washington, D.C.
She said most students who default on their loans never completed their degree.
Baum added that we need to look at restructuring how students loans are repaid.
“Does it really make sense to have interest that you really can’t afford to pay increase your loan principal? That’s a real problem for many students,” Baum said.
Baum encourages students to not take out more than they need, but borrow enough to get by.
“Look, no one likes repaying a loan. If you have to make a loan payment, that’s money you could be spending on something else, and you’d rather do that. But, for most people, they have a job that they wouldn’t be able to get without a college degree,” added Baum.
She also stressed federal loans over private loans, which carry higher interest rates.
Auburn Montgomery’s Senior Director of Financial Aid, Anthony Richey, said students turn to private loans when they max out their federal loans.
“With the rising cost of education these days, it’s tough for students to come up with enough financial aid to cover the full costs,” Richey said.
He encourages students to search for scholarships before taking out a loan.
“Check with the scholarship office, the office of financial aid,” he said.
For King and McKathren, a student loan was the only way to get through college, a decision they don’t regret.
“It has been a great life; I can’t complain,” King said.
Their struggles are now a lesson for other students.
“Try to get scholarships, try to get grants. Try to do whatever you can to get as much free money as you possibly can,” said McKathren.
McKathren also pushes a program called Gear Up. It allows 10th and 11th graders to attend a community college for free for two years.