The challenges of repaying a student loan Essay

The challenges of repaying a student loan - Essay Example As serious as this information may look, these account still falls short in many ways and may not be a true representation of the present problem. Such is the case that Data collected and reported on student loan repayment cannot paint the right picture of the debt’s effects on economy (Suze Ormans). For instance, let’s consider the data showing how many people are presently struggling with payment of their student loans. Presently such statistic is measured by mere prediction, a factor that openly shows how students struggle with loan repayment. Based on the information gathered till this point, it is obvious that much attention on loan repayment burden is needed. This may be explained basing on the following reasons. To begin with, more students today are borrowing large sums of money for their collage than before. Close to 2/3 of baccalaureate recipients today graduate with loan burden and their burden has greatly risen in the past decade on account of inflation. It is true that borrowing will always increase even with a gradual rise in tuition level. Second, borrower’s payment rate is continually rising as interest rates increase. A good example is the federal consolidation loan availed in 2004-05. This loan earned interest at a rate of 3% or even below for some students, a factor that reprieved many borrowers known to be struggling with paying back. Borrowers today have no such privileges; instead, a 6.8% interest rate was introduced on federal student loans. This change meant that the loan repayment would take 10 years and earn 20% more compared to previous years (Dept. of Education, Office of Student Financial Assistance, pg 45). Additionally, this change meant that some students would be left out because of the aggregate loan restrictions in the loan programs offered by federal government leaving them with no other option but to borrow the expensive private loans. The third reason closely relates to