Student loans. It seems like you can’t get through the day without hearing about them lately. Or maybe I just feel that way since I’ve been working on an app design to help solve this massive problem. Whether or not the topic of student loans has been on your radar, it’s hard to ignore the glaring (and scary) statistics that have been coming out recently.
Student loan debt in the United States has surpassed $1 trillion. That’s nine zeros! Student loan debt is a bigger source of debt that credit card debt and car loan debt in the United States.
Not only is there a lot of student loan debt, there are a lot of people who have it. Over 37.1 million Americans have student loans. You might think that only young people have student loans, but that’s far from being the case. Of the 37.1 million, over 2.2 million borrowers are age 60 or older. This is a problem that is facing people of all ages.
And if the numbers of borrowers weren’t staggering enough, the average student loan balance is $24,301. Yup, that’s a lot of debt. I know that I, myself, have much more than that and have many friends who are in similar situations. I know that I personally feel as if my student loan debt is weighing down on me and affecting the way that I approach my personal finances, the decisions I make, and ultimately, the future that I will have. I’m lucky to be employed, but I know that there are many out there who are unemployed or underemployed. When you’re facing thousands of dollars in debt, it’s hard to see the light at the end of the tunnel when you must sort through complicated paperwork, multiple payments and due dates and a tight budget.
That’s where Centz, my app for the MyMoneyAppUp Challenge, comes in. The student loan debt problem is bigger than Centz, but I do think that Centz it embodies the different ways that we can help tackle this massive problem. Centz approaches the problem of student loan debt from four angles: awareness, planning, education and motivation. I think these approaches can be applied prior to taking out student loans and after they have been taken out in order to help manage and reduce the amount of student loan debt.
1. Awareness
You can’t begin to tackle your debt if you don’t know how much you actually have. This principle applies to both those who are about to take out student loans and those who already have them. Seeing how much you’ll be paying after you graduate may affect how you ultimately fund your education. If you’ve already graduated, knowing how much you currently owe is the first step to paying off your student loans.
2. Planning
I believe in good plans. Heck, goal-making is a focus of this blog. Having a strategy in place can help borrowers determine the best way for them to pay off their loans. Maybe they want to pay extra each month or maybe they plan to take advantage of loan forgiveness programs. Either way, a plan will help borrowers be more efficient in paying off their loans.
3. Education
There are many things to know when it comes to student loans – types of loans, consolidation options, repayment options, etc. Financial literacy education – both for student loans and for personal finance management – can help borrowers gain the skills needed to make sound financial decisions.
4. Motivation
When taking loans out as a first year student, the day that you finally start paying off your loans can seem like it is eons away. Staring at your total loan balance after graduating can also make it seem like being free from student loans is also eons away. In both instances, it can be easy to fall in the trap of thinking that the day you’ll pay off your student loans will never come. I think motivation, whether it be through gamification, seeing the total balance fall, or seeing the amount of interest saved, help keep student loan borrowers on track with paying off their loans.
The next few years will be interesting ones in the student loan space. My hope / plan is to see where I can take Centz. To learn more about Centz, head over to Start Making Centz, the site I have set up as a landing page for the app. As I move from idea to creation, I’ll be updating the site to keep y’all informed.
Do you have student loans? How do you think we can work to help reduce the amount of student loan debt?
