Why It Is Hard to Pay Back Student Loans?

There are many reasons as to why it is hard to pay back student loans by defaulters all over the world. Some may be obvious, wile some may not. However, the repayment process of student loan is country-relative. There is no doubt in the fact that countries like those which are linked to the Nordic borders, make it easy for students as education is almost provided free of charge.

Meanwhile, some countries like the UK, US, etc. have kept strict principles and repayment terms which though may be considered fair yet have not presented themselves easy and affordable to students who have had no other option but to go for it. In UK for instance, There are complaints that graduates who have fully repaid their loans are still having £300 a month taken from their accounts and cannot get this stopped.

Research has provided insight into the characteristics of borrowers who have the most difficulty repaying their student loans, but less is known about why they struggle and about their personal experiences with the repayment process.

This knowledge gap makes it difficult for policymakers to get a full picture of why some people successfully navigate the repayment system while others fall off track, or to readily identify which current policies might not be working as intended and what reforms are needed to better support borrowers.

Read Also: Top 10 Schools That Create the Most Student Loans

Certain repayment plans, known as income-driven plans, calculate monthly payments based on borrowers’ incomes and family sizes. Focus group participants in all categories said the complex application and annual recertification processes for these plans made it difficult to take full advantage of these options.

With the student loan repayment system under pressure as more borrowers struggle to repay, this content shall preoccupy itself with explaining the noticeable reasons why it is hard to pay back student loans:

  • Inflation

Inflation can drive the cost of living upward in a very big way. And the problem is that when you sign up for student loans, you can’t always predict what it will cost to exist as a human after you graduate.

Plus, not everyone graduates from college with a high-paying job. And if your income isn’t so high and your living costs mount, it can become easy enough to fall behind on student loans.

  • Lack of the Will to Work During Studies

Many people don’t begin tackling their student loan balances until they’ve wrapped up their studies. But if you’re able to work during college, you can chip away at your loan balance so you’re spending less on principal and interest after you graduate.

Let’s say you’re able to borrow $5,000 less for college. If you’d normally be paying off your student loans in 10 years at 7% interest, knocking out that balance means actually saving yourself more like $7,000 when you account for the interest you’d otherwise accrue on that $5,000 over a decade.

  •  Interest

When you take out student loans, you don’t just repay the exact sum you borrowed. For example, if you take out $20,000 in student loans, you’re generally going to end up spending well more than $20,000 by the time your student debt is paid off due to accrued interest.

Let’s say you borrow $20,000 for college that you’re supposed to repay over 10 years at an interest rate of 7%. If you stick to that schedule, you’ll end up spending almost $8,000 on interest on top of your $20,000 in principal.

  • Extended Repayment Plan and Forbearance

If you take out federal student loans, you may be eligible to apply for an extended repayment plan. That might do the job of reducing your monthly payments individually. But it also sets you up to accrue a lot of interest on your loans that can ultimately make them harder to pay off.

Similarly, you may be inclined to pause your student loan payments at some point by applying for forbearance. But often, interest continues to accrue on student debt even when loan payments are paused. So if you can avoid going this route, you might make your life easier.

Many people who take out student loans assume they’ll be paying off that debt for a really long period of time. But it doesn’t have to be that way. If you’re able to get ahead of your loans during your studies and avoid accruing added interest, you might manage to shed your debt much sooner than expected.


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