Education loan for students in USA

In USA, the government provides financial aid to students via grants, scholarships, loans, and work-study options.

This financial aid is intended to help ease the cost of going to college and encourage the pursuit of higher education by making it more affordable.

The average student loan in USA currently stands at $25,600 per year which breaks down to an average monthly payment of $300 per month.

Although this may seem like a lot, it’s $1000 less than it was 5 years ago!

Student Loan Data

Student loan debt rose by 8 percent from 2016 to 2017, according to a report released by The Institute for College Access and Success.

What’s more, student loan debt has now passed $1.5 trillion, making it one of the largest forms of consumer debt behind mortgage loans ($9.8 trillion) and auto loans ($1.2 trillion).

At present, about 44 million Americans collectively owe $1.5 trillion in student loans—but who are these students and what are they borrowing money for? Do you think that tuition costs will continue to rise over time and if so why do you think so?

 It’s true that college graduates—and especially those with advanced degrees—often earn more than their non-degreed counterparts.

Yet students still struggle to cover tuition costs: The College Board estimates that annually published prices for undergraduate tuition, fees, room, and board are $35,800 at private colleges, $9,650 for state residents at public colleges, and $25,820 for out-of-state residents attending public universities.

On average at both public and private four-year institutions these days, students borrow close to $26,500 a year (not including money they may have borrowed as an undergraduate). That adds up to over $60,000 by graduation.

Student Loan Interest Rates

A Guide to Student Loan Interest Rates, APRs, and Federal Limits. Types of Student Loans Interest rates on federal student loans fall into two categories: fixed rates and variable rates.

Fixed interest rates don’t change over time (the most common fixed-rate for undergraduate students is 5.05%). Variable interest rates typically move up or down depending on what’s happening with market interest rates.

Before July 1, 2006, interest on federal subsidized Stafford loans was a variable rate set by adding 2.05% to 3-month LIBOR + 2 percentage points.

Today, interest rates on federal Stafford loans are fixed and tiered depending on your financial situation.

The interest rate for undergraduates ranges from 3.76% to 7.60%, with lower rates available to students who demonstrate financial need.

Graduate students can borrow at 6.31% to 8.25%. PLUS loans — which are reserved for parents and graduate students — can have an interest rate of up to 10%.

All federal student loans have a fixed interest rate that stays constant over time, but they’re still subject to annual adjustments known as indexes that take place each year on July 1st based on changes in market interest rates.

How Much Should I Borrow?

The amount of money you borrow depends on a few factors, including your income and family status.

If you’re going to school at least half-time and are employed or have significant savings or other resources, you might be able to pay for your education without taking out loans.

If that’s not an option for you, use a repayment estimator to figure out how much it would cost you per month if you borrowed money to cover tuition and living expenses.

When it comes time to take out a loan, look for one with a fixed interest rate so that payments stay stable over time.

It also helps if there’s no prepayment penalty; flexibility will give you more control over your finances—and help avoid disaster if things don’t go as planned.

Common Questions

An overwhelming majority of Americans have student loans. 80% of college graduates have taken out at least one loan to cover tuition and living expenses. On average, new graduates will borrow $37,172 for undergraduate and graduate school.

However, these numbers don’t tell the whole story: Some states tend to lend more than others, with Delaware and New Hampshire topping the list at $32,180 and $31,865 respectively.

Additionally, while it may be hard to believe, it’s not always cheaper to attend a public university than a private one:

In 2013-2014 students who attended public schools averaged $23K per year versus $27K per year for private institutions—or about 15% less.

On top of borrowing for tuition, many students also take out loans to cover living expenses. 47% of students who graduated from college in 2014 had a cumulative debt load that exceeded $27,000.

On average, these graduates owed roughly $8,400 upon completion of their undergraduate degree and $11,600 when they earned their master’s degree.

Given that unemployment rates for new graduates are hovering around 25%, you may be wondering if it makes sense to take on so much debt.

After all, struggling to find a job after graduation will make it even harder to repay your loans! Fortunately, unemployment rates vary based on the field of study:

Psychology majors have an 18% unemployment rate after graduation versus 1% for petroleum engineers!

Subsidized vs. Unsubsidized Loans

There are two types of federal loans available to students: subsidized and unsubsidized. Subsidized loans are awarded based on financial need and accrue interest while you’re enrolled in school, but at a fixed 3.4 percent.

Unsubsidized loans don’t take financial needs into account and accrue interest throughout your repayment period—which might be ten years or more, depending on how much money you borrow.

How you pay off your loans will depend on a few factors, including whether you have subsidized or unsubsidized loans.

Unsubsidized loans accrue interest from day one and require you to make payments each month until they’re paid off.

The interest rate for these loans is adjusted annually, so it’s important to stay on top of when your rates are set to adjust so that you can take advantage of lower rates if possible.

As a general rule, the sooner you pay off your student loans—the longer each dollar goes toward paying down principal rather than interest—the more money you’ll save over time.

Pros and Cons of Different Types of Loans

There are many types of loans available for students to borrow money, each with its pros and cons.

The most common type of loan for college students is a government-issued Stafford Loan; interest on these loans begins accruing from day one, so if you’re going to borrow money from a bank, consider an alternative like a Perkins Loan instead.

Finally, if you want to save yourself money over time, pay off your loan as soon as possible—the longer you wait, the more you’ll be paying.

Talk to your lender about how much of your balance will be canceled once it’s been paid off and make sure it’s worth it!