Debt is a part of everyone’s lives at some point. Whether it’s that first credit card, a car, or your student’s loans for tuition, everyone carries debt. How it’s repaid and how we manage it, these are the things that matter the most in the long-term. In the first quarter of 2017 alone, student debt increased by 34 billion, according to the Center for Microeconomic Data. For a vast majority of people, student loan repayment accounts for a large portion of their total debt. Timely repayment is incredibly important, but a variety of factors can also make it more difficult to keep up with payments each month. Knowing these factors can help borrowers make smart decisions that give them the financial flexibility needed to maintain their repaying student debt.
3 Major Factors That Affect Borrower’s ability in Student Loan Repayment
When it comes time for borrowers to start repaying their student loans, they have a lot of options available to them. The U.S Department of Education has a consistently updated college scorecard, which shows data on student loan debt. They utilize a loan repayment rate statistics, which can be used to understand borrower behavior, and reveals a lot about the factors which affect a borrower’s ability to pay.
Paul J. Isaac's Arbiter Partners returned -19.3% in the third quarter of 2021, according to a copy of the hedge fund's quarterly investor correspondence, which ValueWalk has been able to review. Following this performance, the fund's return sits at -1.6% for the year to the end of September. In comparison, the S&P 500 returned 15.9%, Read More
Here are three major factors to consider when it comes time to start repaying student loans:
1. The Chosen Career Path and repaying student debt
The chosen major sets up a student for their ultimate career. Choosing something that they’re passionate about is important, but the potential salary will decide how they are able to repay their loans after they’ve graduated.
Looking at the latest college salary reports, it’s evident that certain fields are more lucrative than others. Understanding the potential career paths associated with any given major is a smart way to plan ahead and narrow down ideal entry-level positions within the given field. This way the student can have a plan for when they graduate.
2. The Loan’s Interest Rate
A student loan’s interest rate is affected by a variety of different influences. Some examples include the borrower’s personal credit, legislation, financial metrics, and more. Some are within the borrower’s control and some are not.
A strong understanding of proper debt management and good habits surrounding credit cards can put students in a position to receive lower interest rates. For those who are locked into higher interest rates, there are still options like student loan refinancing which can be used to obtain a lower and more reasonable interest rate.
- Where The Borrower Lives
For this final factor, we did a study that looked at cities where student loan borrowers struggled the most to repay their debt. We looked at census data like average housing payments and compared them to the average student loan payment each month.
The results were very interesting, showing a remarkable correlation between specific cities and the ability for borrowers to repay their loans. Take a look below for a deeper insight into the study. Are you someone who is involved in student loan repayment? Which factors cause you to struggle? Let us know in the comments!