Student loan debt is crippling a generation of young people. It’s a $1.4 trillion problem.
According to LendEDU, students polled considered student loan debt a bigger problem than North Korea. You might be pretty familiar with federal student loans. But private student loans are growing, and unfortunately, young borrowers don’t know enough about them.
Let’s start with this: according to the Consumer Financial Protection Bureau, a government watch dog group, more than 34 percent of the complaints they get about student loans are from the private sector. That’s interesting as private student loans only capture 10 percent of the market.
Going back to LendEDU data, they find that nearly all private loan applicants choose a variable interest rate. That’s risky. Fixed rates are locked in. Variable rates fluctuate with the current economic situation.
Here’s why they choose the variable rate. It’s generally lower. On a private loan it’s 7.81 percent. A fixed rate would be 9.66 percent. That’s a big difference. But, because the loan stretches out 9 and a half years, that variable rate will, well, vary. And LendEdu says its predicted that interest rates will rise beyond the savings.
And when the rate goes up, your payment goes up and you’re more likely to not pay it.
Now let’s add one more layer to the private school loan discussion. Another site, www.studentloans.net, says that one particular private loan servicer has more complaints than any other.
Navient has been sued by the Consumer Financial Protection Bureau “for failing borrowers at every stage of repayment.” Navient on its website pushes back on these allegations and says it intends to “vigorously pursue this matter in court.”