With credit standards tight and college tuition prices on the rise, student borrowers may need an amortization schedule for loans to ensure that they stay on top of their payments. Especially since, according to a recent study from the U.S. Department of Education, more than one in 10 borrowers defaulted on their federal student loans.
The study was conducted over a course of three years and showed that students only struggle more to pay loans back over time. The first three years that students are required to make payments, the rate was 13.4 percent while after two years, the rate is just 9.1 percent.
Pauline Abernathy, vice president of The Institute for College Access and Success, told Bloomberg Businessweek that default rates are just the tip of the iceberg in terms of borrower distress.
Results also showed that nearly 250 schools nationwide had a 30 percent three year default rate and 37 of those schools were higher than 40 percent.
"We continue to be concerned about default rates and want to ensure that all borrowers have the tools to manage their debt," U.S. secretary of education Arne Duncan said in a statement. "In addition to helping borrowers, we will also hold schools accountable for ensuring their students are not saddled with unmanageable student loan debt."
The study began after complaints that commission-driven debt collectors the government hires do not fully inform students about all affordable options to repay their debt. As reported by the source, students have now borrowed $1 trillion to pay for their college education – surpassing the credit card debt amount.
Lenders would be wise to use student loan management software to ensure that any repayment plan created for college students will not further their debt. This will help the economy overall if the younger generation is not faced with insurmountable payments.