Why Millennials Could Be the Last Generation With Crippling Student Loan Debt

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Millennials are defined by many things: their love of social media and avocado toast, their supposed sense of entitlement … and their crippling student loan debt.

Today’s graduates have an average of $37,172 in student loans, which is a 6 percent increase from last year.

But I have to think, or at least hope, it won’t always be this way.

Will millennials be the only generation with crazy student loans?

I don’t have a crystal ball. But here are four reasons the tide could change and subsequent generations might not be saddled with crazy student loan debt — followed by experts who say that might be wishful thinking.

Millennials won’t let their kids make the same mistakes

If you talked to my friends about their children’s college education, they’d say something along these lines: “My kids can go to community college or get scholarships or do something else entirely, but they’re not going to take out a lot of loans.”

That’s because they don’t want to see their children suffer the same fate they did: the feeling of being held back by student debt.

Many parents of millennials didn’t understand student loans, as they hadn’t taken them out themselves. They didn’t warn their kids about the consequences, about the fact that this debt could haunt them for a long time.

But it’s hard to imagine millennial parents, having experienced the shackles of debt, would let their kids make the same mistakes.

Mark Kantrowitz, a college admissions and financial aid expert, has a different opinion.

“Not only will the children of millennials make the same mistakes as their parents, but they’ll also make their own new mistakes,” he said. “Millennials, for example, are not saving for their children’s college education to any greater extent than their parents.”

Higher education funding could change

Bernie Sanders might have lost the election, but the ideas he trumpeted are alive and well. Many people want to reduce the cost of college — and potentially make it free for all.

In recent months, New York state announced free tuition for residents whose families make under $125,000 per year. The University of Michigan did the same for families earning less than $65,000 per year. And Brown University joined the growing ranks of elite institutions that offer only grants — and no loans — in their financial aid packages.

Kantrowitz didn’t comment on the schools themselves, but he said changes to government funding were one of the “only foreseeable changes” that could stop the tide of ever-increasing student debt. That being said, he wasn’t optimistic it would happen.

“Although one can argue that government grants will pay for themselves through increased federal income tax revenue because college graduates earn higher income and therefore pay more taxes, policymakers lack the political will to make this happen,” he said.

Educational alternatives could grow

You can already see it happening: a backlash against formal higher education. One poll found that just 38 percent of recent grads felt their education was worth the cost.

As a result, Pablo Solomon, an educational consultant and vocational counselor, thinks tomorrow’s students “will do a better job of choosing educational and vocational training that might actually result in their having the ability to make a living.”

He also believes more businesses will partner with colleges so students will have jobs waiting for them when they graduate.

Potentially turning that idea into reality are a few alternative forms of education, including:

  • Massive Open Online Courses (MOOCs): These online courses offer unlimited participation and are taught through recorded lectures, readings, and forums.
  • Bootcamps: Mostly limited to software coding right now, these short and intensive courses promise students will find employment after graduation.
  • Income-share agreements (ISAs): With this type of education, students don’t pay anything upfront; instead, they owe their educator a percentage of their income once they graduate.

Although Kantrowitz appreciates these ideas, he doesn’t think they’ll have a real effect on the higher education market.

He called ISAs “just another form of debt” and said that although they “shift the risk of failure” from the borrower to the lender, they still must be repaid. As for MOOCs and bootcamps, he pointed out that comparatively few students can successfully complete these types of programs.

“Certainly, all of these innovations have value, but they are not nearly as disruptive as the hype would have us believe,” he said.

The cost of college is unsustainable

The average cost of one year at a private nonprofit college has nearly doubled — from $25,070 to $45,370 — since the early ‘90s. Meanwhile, the median household income has increased by a paltry 11 percent — from $53,350 to $59,039.

That’s unsustainable. So wouldn’t colleges eventually have to lower their tuition?

Not necessarily, said Kantrowitz.

“While the idea that market forces will cause a drop in prices as demand drops has a certain allure, the real world doesn’t work that way,” he said. “Wishful thinking will not make the cost decrease. The only real solution is for the government to start paying its fair share of college costs.”

And if things don’t change, he predicted fewer students will pursue a college education. “At some point, we will reach a tipping point where people just can’t afford to go,” Kantrowitz added.

Kantrowitz said more people have already started attending lower-cost community and public colleges — a shift that could eventually force liberal arts colleges without big endowments to merge with nearby colleges or close.

Jason Johnson, director of communications at uAspire, an organization that helps young people afford higher education, agreed.

“There is the possibility of there being a ‘new normal’ in the future, where the cost of attending college at many public and private institutions for low-income and some middle-income families becomes out of reach at current levels of financial aid,” he said. “The downside of this ‘new normal’ is that it will make it harder for businesses to find qualified workers and place a drag on the nation’s economy and productivity.”

What to do if you’re over student loans

As you can see, it’s unclear whether future generations will suffer from the same student debt burden millennials have.

All you can do is make your voice heard and help those around you make smart decisions.

And if you already have student loans, here are some ways to ease the sting of repayment:

  • Income-driven repayment: Selecting an income-driven repayment plan will allow you to cap your payments at 10 to 15 percent of your income, with the remainder being forgiven after 20 to 25 years. Just be aware you’ll pay significantly more interest over the lifetime of your loan.
  • Deferment or forbearance: These programs allow you to pause payments on your federal student loans for up to two years. Although they’re a boon in an emergency, note that unsubsidized loans will still accrue interest during this period — meaning you should use these options only if absolutely necessary.
  • Refinancing: If you have a high income and credit score but are drowning in debt, consider refinancing your student loans at a lower interest rate.

Use your story to teach your younger siblings, your friends, and eventually your children about the consequences of borrowing money for school.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.