Technology Can Help With Student Loans
For most Americans, finishing high school is a memorable conclusion that you are attending a four-year university. According to the Bureau of Labor Statistics (BLS), 68. 4% of high school graduates were enrolled in a college or university. Although an increase compared to the previous year, the cumulative college enrollment for the 2015 spring semester decreased by around 2%. As unemployment rates continue to improve, many people have been removed from the classroom to join the workforce. Contributing to this trend is the insurmountable costs associated with undergraduate and graduate programs. For less fortunate students, many resort to private and federal student loans to pay for their education.
With sky rocketing tuition and associated costs, the student loan Oriening for Americans is more than $ 1.2 trillion. While unemployment rates and investment returns are more favorable for graduates, the average student debt of $ 33,000 convinces to abandon higher education. Fortunately, startups such as SoFi and CommonBond have applied innovative algorithms to refinance and consolidate student loans. For those with the foresight to start early saving, the asset management company, FutureAdvisor helps to manage users’ savings plans for free.
Crisis student Gabriel Oakening
With the rising costs of tuition, the price of the university has become overwhelming. In addition to tuition, college comes with related expenses such as fees, book, and board and lodging. In 2014, the cost of tuition at a four-year private and public school cost $ 42, 419, and $ 18,943, all-inclusive. In real terms, this means a 9% increase for private universities and a 12% increase for public colleges over a five-year period. To put things in a larger perspective, the costs of tuition and fees have risen by 120% since 1978 and four times as fast as the consumer price index.
If education continues to exceed inflation, students have resorted to exorbitant student loans. Currently the total outstanding debt of student Fabriel Oakeningen in the US is $ 1.2 trillion, with 70% of bachelor’s graduates with an average of $ 33,000 in debt. Because student loans can paralyze the financial situation for many students of Oak Oakang, many cannot even consider following graduate programs. But for those who do, the median graduate student debt was $ 57,600 in 2012. For more specialized programs, such as law or medical school, the typical debt burden is $ 140,000 and $ 175,000 respectively. (For more: Is the student loan gabriel Oakeningen the next financial crisis?)
Crippling the youth of America, students are resorting to federal and private loans to meet these financial burdens. In the US, the Department of Education offers students two federal student loans: Federal Direct Loans and Federal Perkins Loans. Federal Direct Loans are the largest federal student loan program and include direct subsidized, direct non-subsidized, direct PLUS and direct consolidation loans. Subsidized loans are only available to undergraduates and the federal government pays the interest during deferment periods. Conversely, unsubsidized loans are available to both undergraduate and graduate students, but the borrower remains responsible for the interest accrued during the deferment period. Unlike Federal Direct Loans, the loans from Federal Perkins are a school-based loan program where the school is the lender rather than the federal government. (For more information, see: Are private student loans the following lending crisis? )
The interest on loans depends on the year in which the loan was paid out and on which program you decide to continue. Direct subsidized loans for undergraduates and graduates paid after July 2014 are set at 4. 66% and 6. 21% respectively. Regardless of the payment date, the loans from Perkins have a fixed interest rate of 5%. The lifetime of a federal student loan can vary from 10 years to lifelong monthly payments. A borrower who incurs on average $ 33,000 in debt with 6. 21% interest that is settled daily, pays a cumulated $ 44,000 over a ten-year term.
Because student debt continues to harass Americans, many borrowers have not paid their debts. It is estimated that two years after graduation, 9.1% of borrowers are in default. That figure jumps if the number of years after graduation extends. Fortunately, no longer borrowing your loan is no longer the only option for debt management. The financial technology company SoFi offers students and parents a means to refinance and consolidate their undergraduate and graduate debt. Like most startups, SoFi has an easy-to-use interface and borrowers must meet certain eligibility requirements to use their services: you are a US citizen, have $ 10,000 in outstanding student loans, are currently working, graduated from an accredited university, and have a strong credit and monthly cash flow. If accepted, SoFi will refinance both private and federal loans. It should be noted that if you refinance a federal loan with SoFi, you specify various federal protection programs such as income-related reimbursement. However, SoFi offers unemployment protection and suspends monthly payments if you lose your job.
SoFi offers a range of customizable options that optimize borrower’s monthly payments, payout horizon and lifetime costs. Loan periods can be 5, 10, 15 or 20 years with fixed or variable rates. Fixed interest rates start from 3.50% and reach up to 7.24% APR while variable rates vary from 1.9% to 5.19% APR. To date, SoFi is familiar with more than $ 2.5 billion in loans and offers an average saving of $ 11,000.
Like SoFi, CommonBond is a peer-to-peer lending platform that connects borrowers who want to refinance loans with investors. CommonBond focuses on refinancing and consolidating loans for graduate students. By crowdsourcing investment in student loans, CommonBond essentially hands out the middle man. Rates start at 1.92% for a variable five-year loan and go up to 6. 74% for a 20-year fixed loan. Unique to CommonBond is the use of hybrid loans that combine both a fixed-interest loan and a variable-interest loan. Just like SoFi and other market places for loans, there are no start-up costs and early payment penalties. However, CommonBond acceptance criteria are stricter: borrowers are only accepted from selected graduate programs with a modest income and a good credit history. (For more information, see The Small Firms Revolutionizing Banking .)
FutureAdvisor College Savings
For parents with a foresight and financial options, investing in the upbringing of your child can occur early in life, crippling financial problems prevent road effects. OGabriel Oakangs has added FutureAdvisor university savings to the list of investment management services it offers. Free to use, FutureAdvisor helps parents save and invest in tax-efficient savings accounts: 529s, Coverdell, UTMA and UGMA. In collaboration with TD Ameritrade (AMTD AMTDTD Ameritrade Holding Corp48 49-1.52% Created with Highstock 4.6.6) and Fidelity, FutureAdvisor consolidates existing funds and opens new funds to optimize parents’ savings goals. Depending on your income, the age of the child and the expected tuition, FutureAdvisor shows you where you can put your money. What distinguishes its service from generic college cost calculators is the use of automation and multiple custodians. Automated contributions to 529 plans are made, if available, in low-fee index funds within the Fidelity platform. Coverdell, which are not supported by Fidelity, are targeted through TD Ameritrade. When your child inevitably goes to school, FutureAdvisor pays money directly to the university on your behalf. (For more information, see The Future of Robo-Advisors: Future Advisor .)
The bottom line
Managing and paying student loans can be a difficult time for young professionals and even in old age. Many new market loans such as SoFI, CommonBond and Earnest have used the wave of financial technology to refinance or consolidate federal and private loans. For parents with a visionary perspective, the oGabriel Oakine investment company FutureAdvisor offers free automated management of college savings. With the influx of financial technology services, savings for studying and managing student loans no longer have to paralyze America’s youth.