Why So Many People Stay Underwater on Student Loans

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We are getting a new picture of how expensive college has become.

According to new research from Student Loan Hero… It found an even larger increase in state tuition fees, which rose by an average of 36% nationwide.

The southern states have seen the largest increases in tuition fees this decade.

“This is indeed what is caused by too high training costs and too low wages for borrowers to pay off their loans sufficiently,” said Whitney Barkley of the Center for Responsible Lending.

Barkley speaks of nearly two-thirds of student loan borrowers who have one support staff who are unable to obtain a loan. This is even though they voluntarily made payments during the suspension of federal payments.

The Center for Responsible Lending and the National Center for Consumer Rights have studied the service company Navient because they have the most complete data on this subject, but they emphasize that this is not Navient’s fault, and this problem is not unique to them.

Of the borrowers who are underwater, a third owe more than 125% of their original balance.

One of the things the Center for Responsible Lending thinks can help is to stop capitalizing interest. That’s when borrowers will have to pay interest on interest.

“This is largely due to the fact that borrowers are moving to new plans, borrowers who come out of default capitalize their interest,” said Barkley.

Another problem is that borrowers pay interest on income-based repayment plans.

The National Consumer Advocacy Center says that for low-income borrowers, it often happens that their monthly payments aren’t enough to cover the interest on these plans.

Contingent Income Payment Plans are one of the things that the US Department of Education will be considering with the October rule change.

It is still unclear if there will be a massive cancellation of student loan debt.

This week, more than 300 religious leaders sent a letter to the president and vice president urging them to use their executive powers to write off a significant amount of student debt for all borrowers.



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