On Graduation Day, Student Loan Borrowers Face Uncertain Future

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By Consumers Union on Thursday, June 14th, 2012

By Guest Blogger Elva Linares

While Congress debates the doubling of interest rates on subsidized federal student loans starting July 1, millions of graduating students are facing an uncertain future full of debt, and without job opportunities.

As the Washington Post recently reported, graduation day is a milestone that causes mixed emotions in light of the current challenges facing many debt-laden graduates.  The Post’s video features interviews with graduates like Sabrina Browne:

Sabrina Browne from Seton Hall, views the current student loan situation as a “mixture of feedbacks.” While she tries to keep her head above water, the thought of her large debt dwells in the back of her mind.

As the story also notes, economists predict that graduates’ student debt burdens could have significant consequences for the economy.  Graduates with heavy debt loads are less likely to purchase new homes or make investments, and this can be a drag on economic recovery.

Currently, out of the 9 million currently unemployed, 4.7 of them attended college. Students already graduate with a large amount of debt and this debt will increase by $1000 per person on average if interest rate doubles on subsidized federal loans.  Given the current job market, graduates find it difficult to find competitive jobs that will cover living expenses including loan payments.  Often graduates are unemployed or are underemployed.  

What does all this mean for our graduates?

It means that they will have a harder time paying off their debt since entry-level jobs do not offer high wages, and graduate earnings are not keeping up with inflation. This affects the purchasing power of new graduates as more of their money goes to pay off debts rather than to purchase goods and services that drive growth.

It’s important for graduates to start planning now in order to ensure they can keep up with their loan payments once they become due.  If you are a graduate or a family member of a graduate, check out the CFPB’s “Debt Repayment Assistant” for tips on how to manage student loans in repayment.

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