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Graduates stare at a tsunami of student loan debt (illustrated)

As someone who has covered student loans for five years — and still owes about $6,000 on the $15,000 I borrowed — I’m starting to get worried.

Not because our collective debt keeps getting bigger and Donald Trump wants to make everything way worse, though that sucks. But because it seems like the bigger the debt gets, the less people seem to pay attention or care. It’s eating us alive, but people have accepted it as the new normal. Or maybe simply beyond comprehension. Some quick stats…

  • Over 44 million Americans have student loan debt. That’s nearly one in five U.S. adults, about the same number of Americans who don’t have health insurance.
  • In the past 15 years, since just before I started college, student loan debt has tripled as a share of the total debt Americans owe. It’s the biggest thing after mortgages.
  • Women have a larger share of the debt — about $833 billion of the $1.3 trillion owed — and are slower to pay it off.

There are no easy solutions, not least because the burden is on a Congress that can’t agree on the definitions of up and down anymore. We need major changes in the way college is funded and how costs are regulated.

We also need to do a better job of scaring new borrowers about their responsibility — because the mandatory student loan counseling we get is a joke, and many forget it even happened.

On a personal level, we need to learn to regularly reevaluate what we owe and what options we have to pay it quicker.

We can’t let student loans become a word problem

I hate talking about the numbers behind student loan debt. I hate the figure $1.3 trillion.

I’m not sure how many Americans have ever held $1,000 in their hands, but 62 percent have less than that in savings. We’re not equipped to understand numbers that big. And we can wave all those zeroes away as everybody else — no drop in the ocean believes it is responsible for the flood.

There’s a whole field of science dedicated to how people think about money. It’s called neuroeconomics, and one of its big discoveries is that stressing about money actually causes us to make poorer financial decisions.

On the other hand, the more immediate and relevant you can make a problem — like paying off debt or saving for retirement — the more likely we are to tackle it head-on. One experiment found that showing young adults a photo of themselves virtually aged 40 years actually motivates them to save more money.

“$1.3 trillion” fails to do that. It’s too abstract and far away to help us focus on the problem. It’s sort of like how word problems on math tests were supposed to help us out by putting algebra in a real-world context. But nobody (except maybe a few engineers) really cares about the velocity of two trains traveling in opposite directions, and nobody really cares how fast student loan debt is ballooning. Most people have no sense of scale or comparison, or any direction about what to do with the information.

The numbers that matter

Here’s some context for the $1.3 trillion in student loan debt. If the Department of Education were a bank, it would be the fifth biggest in the U.S. That’s just behind Wells Fargo and larger than the next three biggest banks combined. It would fall squarely into the heavily regulated “too big to fail” category.

Obviously, the DOE is not regulated the same way. Maybe it needs to be, since more and more people can’t keep up with their obligations.

In 2003, student loans made up 3.3 percent of total household debt. Now, they make up 10.6 percent. One of the reasons is the recession — many states, struggling to balance their budgets when the economy tanked, cut back sharply on education funding. That meant less in scholarships and other financial aid, and that money hasn’t come back very fast where it’s come back at all. It also meant less in school funding, which translated into more frequent tuition hikes.

Again, all this has become the new normal, but it’s not sustainable. Pay increases for graduates are just keeping pace with inflation, housing costs continue to rise as the economy improves, and our budgets are getting squeezed. Millennials are putting off buying cars and homes and other things that keep the economy growing. And interest rates on student loans are headed back up, too. At some point we run out of things to cut back on, to say nothing of getting ahead and building toward retirement.

The most recent Federal Reserve report on household debt shows repayment rates have “deteriorated steadily between 2004 and 2014 and have remained stubbornly high since then,” according to its economists. Eleven percent are more than three months behind or in default on their loans. For people with every other kind of debt, things are holding steady.

How to cope

Trump wants to eliminate federal student loan forgiveness programs and consolidate the various repayment plans down to one option. Congress, for all its flaws, isn’t likely to let that happen. So until it does, you actually have plenty of options to get ahead of your loans.

If you can’t make payments right now, you may be able to defer your loans so you don’t have to make payments or accrue interest while you’re unemployed, studying, in military service, or have financial hardship. If you can’t get that, you may be eligible for forbearance, which reduces or stops payments for up to a year. If your income is low enough, you may be able to accomplish the same thing by getting your payments reduced to zero on a Pay as You Earn plan.

If your student loans are in default — which could lead to the federal government simply taking money out of your paychecks or taxes — you can apply to rehabilitate your loan. If you can make nine monthly payments on time (payments may be as low as $5 depending on your income) you’re out of default and become eligible for the above options again, plus getting on other repayment plans that are more flexible than the one you defaulted on.

Another option is to consolidate your loan into a Federal Direct Consolidation Loan. That can get you out of default faster, or can be used to combined multiple student loans into one payment with a fixed interest rate. The catch here is that consolidating out of default doesn’t remove the damage to your credit that rehabilitation can.

If you’re not currently in student loan hot water but worry you might be sometime soon — or that Trump might take away your options — you should still take a look at all the student loan repayment options available. Under Obama, the education department set up a handy repayment estimator that can pull your student loan information, figure out what options you qualify for, and tell you what you’d end up paying. I did the same thing myself when Trump got elected and explained how the process went for me.

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Article last modified on August 8, 2017. Published by Debt.com, LLC .