Why Student Loan Debt Happens and Grows So Quickly?

Students borrow tens or even hundreds of thousands of dollars for their education. Once they stop attending school, their loans become due, whether they receive a degree or not. But with or without a degree, many borrowers cannot find well-paying jobs. Most, if not all, have little or no prior credit experience.  As a result, repaying these immense debts seems impossible. And the most frightening situation here is that people make these mistakes because they have little or no understanding of how credit works.

Even worse, the loan companies and student loan collectors understand how vulnerable their customers are. Student borrowers and their parents believe the lenders are doing them a favor. However, the system is designed to mislead the borrowers so lenders can earn more profits. As a result, if you contact them for help as a borrower, their customer service representative will always recommend a loan deferment. With a loan deferment, you are not required to pay for up to three years. So what looks like a bargain is actually a form of credit robbery.

Why? An unpaid debt accrues interest at a rapid rate. The higher the debt, the more interest the lender earns. For example, the monthly interest on a $30,000 loan at 4.5 percent is $1,350 in the first year. If the loan cost is 7% interest, the lender earns $2,100 in the first year.

But because unpaid interest is added to the loan balance, the interest the lender earns increases every month. The result is that the interest on these hypothetical loans might add more than $6,000 to this debt by postponing payments for three years. As a result, your $30,000 loan has grown to $36,000 merely because you asked the lender to help you, and they recommended that you defer payments for a few years.

That is not what any reasonable person would consider to be a favor. But what other choice does a borrower have?

Ah, that’s why lawyers can justify their fees – by saving their clients lots of!

For example, someone with a low income might avoid paying these interest obligations on their federal student loan by making a modest monthly payment. So how modest might this payment be? It might be less than $100/month for someone earning under $4,000 monthly.

Fortunately, you don't have to!

I will explain how to prevent your student loan debt from exploding. However, if it is too late to stop that, I will find options to repay your student loan debt at the lowest possible cost.

In summary, to seek financial advice from a debt collector or anybody you owe is foolish. Your best interests and the lender's best interests are always in conflict. Even a friendly and pleasant customer service representative will be promoting their employer's objectives, not yours.

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