Why Jobs Growth Helps Private Student Loan Borrowers
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UPDATED: Mar 22, 2022
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Private student loans are the bane of young borrowers. These college loans carry high interest rates that make it difficult for borrowers to affordably repay them. On top of that, private lenders do not offer many of the same deferment, forbearance, and assistance options that come with federal student loans, forcing many borrowers into default.
These factors on their own make it difficult enough for young borrowers to repay their mounting private student loan debt, which has soared past the $1 trillion mark. However, the weak economy is another factor that has led to many private student loan borrowers defaulting on their payments since many of them are unemployed or underemployed.
Fortunately, more jobs have been created in recent months and the economy has seemingly begun to rebound, if only by a small amount. More jobs can help young borrowers by giving them the paycheck they need to pay off their often sky-high private student loan debt.
According to the LA Times, a payroll servicing company called Automatic Data Processing found that an additional 158,000 jobs were added in October. One month prior in September, 114,000 jobs were added. The Labor Department also reported that unemployment claims in October fell by 9,000 to 363,000, signifying a small gain in employment. The report from the Labor Department also revealed that 84,000 more jobs were created in August and September than previously estimated, according to Reuters.
“This report is consistent with the emerging picture of an economic recovery that is continuing to regain traction after grinding to a halt earlier this year,” said Millan Mulraine, an economist at TD Securities in New York, according to Reuters.
While these changes are occurring at a slow pace and in small measurable amounts, any improvement that can help the prospects of unemployed recent graduates is good nonetheless and a sign of a recovering economy. With the economy now gradually recovering, private student loan borrowers can benefit from employers looking to hire them on. New jobs mean steady paychecks that newly employed borrowers can use to begin repaying their college debt. This can’t come soon enough for many borrowers that are currently in default or nearing the end of their deferment options.
Time will tell if the government’s policies will continue to lead to steady job gains now that President Obama has won a second term. The Consumer Financial Protection Bureau, which is responsible for helping to regulate private student loans, will once again have the support of the very same administration that approved its creation in the coming four years. Combined with the current, but slow, trend of employment gains, this may very well be the start of better days for college loan borrowers.
Even though 85 percent of total college debt is made up of far more manageable federal student loans, the remaining 15 percent in private student loans still represent a body of young borrowers in need of ways to repay their loans. Since total loan forgiveness is about as likely as world peace, a far more practical approach would be for young borrowers to transform into young professionals and repay the debt that helped them obtain a college education—a rare feat in a struggling world and struggling country. Many young borrowers, be they unemployed or underemployed, will just have to hold their breath and keep submitting applications alongside the rest of the nation’s struggling citizens. As far as the statistics are concerned, young borrowers can rest a little easier knowing better days are nearly upon us.