According to Student Loan Hero, the national student loan debt increases every year. If you're a parent of a college-age child or a college student dealing with the financial hardships and pressures of paying off these loans, you know the payments and interest rates are astronomical. Tuitions can be ridiculous and other school-related costs are no drop in the bucket. Higher education is a major expense and we're paying the price for it. As per Student Loan Hero, "the average college graduate had over $37,000 of student loan debt in 2016." And the price is going up.
But did you know that students can (and do) use their student loan money on more than their tuition and classroom needs like books? It may seem a little fishy, but it's not illegal, as per Student Loan Hero. And it's been revealed as per the results of a 2016 Student Loan Hero survey that "students in 2017 are 2X as likely to spend student loan money on non-educational expenses than the class of 2016."
With so much being borrowed, one would think this dough should be going straight for what it is intended – higher education. But students are using this loot for their other expenses, some of which are totally unnecessary. Using student loan money towards non-school expenses is actually costing these students more than if they paid for these things normally, due to the interest rate. It's digging them into an even deeper financial hole.
41.3% of these students are spending their loan money on their monthly bills such as their rent and cell phones, 14.9% are using it for clothing and accessories, 12.8% for food, and 2.5% for drugs and alcohol. Perhaps the first three can be justified, but the drugs and alcohol!? Those are the students who could use their next four years of schooling the most!
The issue may be that these students can be clueless or not entirely well-informed about school-related finances. As per Student Loan Hero, 7% don't even know their yearly costs for school and a whopping 59% don't have a clue when their loans will be paid off. And while most federal loan borrowers are on a 10-year repayment plan, the average amount of time people take to pay off their student loans is an astounding 21 years.
While this news may be hard to swallow, there are ways to handle student loans with planning and commitment. Take a cue from these 5 simple steps to paying off your student loans and be debt-free in the near future.
If you're a recent college grad, take note of some important investment and financial strategiesthat will help you make wise money-related decisions. If you made it through those brain-bending final exams, you can ace your student loans payoff regime too.
For more detail regarding the Student Loan Hero's findings, you'll find their infographic quite revealing. As a student or a parent of one, this information can help you take the right steps towards a solid student loan plan that makes sense and saves "cents" with every smart move.
