Did you know that in the last decade, the student loan debt in this country has grown to more than $833 billion and has reached an all-time high of $1.4 trillion?
This according to global information services company Experian who said in a recent statement that it analyzed data from its consumer credit database and found 13.4 percent of U.S. consumers — from the “Silent Generation to Generation Z” — have one or more student loans on file.
The report went on to further state Experian found that while student loans constitute the largest amount of non-household debt and the fastest growing debt segment, there is a lower percentage of late payments on these loans.
“Student loan balances are on the rise, which is a result of the increasing cost of higher education. Even with this number moving upward, the data is showing a decrease of delinquencies, which means that consumers are managing their loan payments better than they have in the past,” said Michele Raneri, Experian vice president of analytics of the report.
Also according to the statement, the average total student loan balance is $34,144, the average number of student loans is 3.7 per person, up from 2.4 in 2007, and the percentage of late payments has dropped 10.1 percent since 2009.
Generation X has the largest outstanding balance — $39,802, Experian reported. Generation Y has the largest number of loans — 4.4 per person. Generation Z has the highest percentage of loans currently in deferment – 77 percent.
Experian also said that its study found that consumers on the East Coast tend to have higher student loan balances, with Gainesville, Fla., having the highest average balance at $42,400, while Glendive, Montana has the lowest at $20,200.
So, all of this begs the question: Is it a good idea to quickly pay off these debts? Not always, some experts suggest.
In an article posted on CBSnews.com, a 2013 study based on Labor Department statistics, Americans holding a four-year college degree made 98 percent more per hour on average than those without a degree. And “good debt” is typically a low priority to pay off; compared to other expenses one may be carrying.
Depending on the type of debt you have — as there are different kinds — they can vary widely in how much they cost the borrower.
Credit card debt is typically the most expensive, with high interest rates and a many fees. Mortgage debt is at the other end of the debt spectrum, with lower interest rates. It’s said student loans fall in between, but are closer to mortgages than credit cards especially for federal student loans, the article added.
Private student loans are another matter, it said. As with most forms of credit, private student loan interest rates are based on a credit score: The higher your score when you get the loan, the lower your rate will be. So, if you are someone who is just starting college, you probably have little to no credit history. Ultimately, these means students are likely to have average rates.
Student loans have many payment options.
Whatever your situation, there’s a federal student loan repayment plan. The Department of Education lets you choose from eight repayment plans, several of which are designed for borrowers with low income levels. If one repayment plan isn’t working, switch to a different one. On the other side, private lenders provide”financial hardship forbearance,” meaning you can suspend your payments for a while due to financial hardship if needed, the article states.
Setting Financial Priorities
It’s important either way to set financial priorities for yourself and your situation, since private student loans are more stringent than federal loads, paying the debt off first may make sense.
However, there may be other financial tasks that rate even higher than a private loan.
For example, you can work on paying off any bad debt you have – i.e. credit cards which will save you money in the long run because the quicker you rid yourself of this debt, less interest will be paid over the life of the debt, the article informs.
After you have paid off your credit card debts you may want to start saving for a rainy day via a savings account. Once that has a nice healthy amount, start building a retirement savings for when you are ready to retire.
Additionally, it’s never a bad idea to put away money in an emergency fund in case you lose your job or have unforeseeable expenses if you are able.
In closing, it is up to you whether you want to pay off your student loan debt sooner rather than later since it depends on your own personal circumstances.