Families paying for college are relying on federal student loans more than they have in recent years, a recent survey said.
Overall, 46% of respondents said they planned to use federal student loans to finance a college degree, a 3% increase from 2019, according to a College Ave survey. Moreover, respondents who planned to use private student loans jumped to 20% this year, up from 12% in 2019.
Dependence on merit scholarships was on the decline, with 51% saying they would rely on those scholarships compared to 64% four years ago. Families also planned to rely less on parents' savings, with 40% saying they put away money to fund college compared to 50% in 2019.
The growing appetite for student loans comes amid an imminent decision on federal student loan debt forgiveness.
The U.S. Supreme Court's final ruling on two lawsuits aiming to block President Joe Biden's forgiveness plan is expected to be made public by the end of the court's term in late June or early July.
The plan would cancel up to $10,000 in federal loans per borrower and up to $20,000 per borrower for those who used Pell Grants in college. About $441 billion in outstanding student debt could be forgiven if the plan moves forward.
If Biden's student loan relief plan goes into effect, private student loans won't qualify for any of its benefits. If you hold private student loans, you could consider refinancing these to a better interest rate to lower your monthly payments. You can visit Credible to compare options from different lenders and choose the one with the best rate for you.
Inflation is a major concern for students today
Inflation and the rising cost of college was a major concern for many students, but it was not a deterrent for attendance, the survey said.
College tuition and fees rose by 20% over the last decade, according to a recent Best Colleges report. Despite the concerns over costs, 81% of students said that a college degree was crucial for their future, according to College Ave.
Moreover, 61% said that increasing costs had impacted their finances and their ability to save. However, 71% said they had a personal financial goal they were working toward, 60% said they had a job, and 50% said they kept a personal budget.
"Over the years, we've seen how the mix of methods families use to pay for college can shift," Joe DePaulo, co-founder and CEO of College Ave Student Loans, said in a statement. "One thing remains consistent: students and their families value an investment in higher education and its promise for a brighter future."
If you are interested in paying down your private student loan debt, a refinance could help you lower your interest rate and monthly payment. To see if this is the right option for you, contact Credible to speak to a student loan expert and get all of your questions answered.
Tips for paying off student loan debt faster
Fifty-five percent of graduates from the Class of 2019 left campus with student loan debt, according to data from LendEDU.
Students, however, have a strong, basic understanding of how student loans work, the College Ave survey said. Most respondents who have student loans (79%) said they know that financing college tuition via loans means they will pay more back than they borrowed.
Here's how you can keep those borrowing costs down:
Plan your repayment
More than half (61%) of students with student loans said they weren't sure what their student loan bill would be at graduation – 69% worried it would be more than they planned for, and only 47% were confident in their ability to repay the loans, College Ave reported. Having a fundamental understanding of the amount you borrow and how interest rates work will help you understand the total cost of the loan. This is key to getting a monthly payment plan in place.
Apply for grants and scholarships
Scholarships and grants can help you pay for college, and you won't have to pay anything back. Various scholarships and grants are available, but applying as soon as possible is essential.
Consider refinancing to lower rate
Refinancing your student loan could help you get a better rate. By maintaining your payments or increasing them, at a lower interest rate, you'll be able to reduce the principal balance faster. However, private student loans won't qualify for federal student debt cancelation or the ability to use an income-driven repayment plan.
If you think refinancing is the right choice for you, visit Credible to compare multiple student loan lenders at once and choose the one with the best interest rate for you.
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