According to a recent report from the Student Borrower Protection Center (SBPC), student loan debt may lead to additional interest paid on other forms of debt, including credit cards and mortgages. Borrowers may not realize just how much their debt can influence these other payments and may be paying higher prices without even realizing it.
The effects of student loan debt are far-reaching. Approximately 44 million Americans carry a collective $1.6 trillion in student loan debt. Most of these individuals also carry other forms of debt, the most common of these being mortgages and credit card debt. According to this SBPC study, these individuals are also forced to pay up to tens of thousands more in extra costs when purchasing a home or car or even using their credit card.
The SBPC study took data from credit reporting agency, Experian, and created three different scenarios involving a student loan borrower who had low, medium, and high levels of debt. Using these figures, they looked at how these individuals would be charged for taking out a new car loan, holding a credit card balance, or taking out a mortgage.
They found that borrowers who had higher levels of student loan debt were paying additional costs when taking out a car loan or mortgage when compared to another borrower with lower levels of student loan debt. The borrower with low levels of debt ended up with a lower interest rate, which resulted in lower monthly payments and lower overall balances paid. The differences in interest rates were significant, many of them being over three percent higher than the lower level debt carriers. With higher interest rates, the borrowers with higher levels of debt ended up paying thousands more before fully paying off their loans.
The same findings were discovered with respect to credit card debt carried by borrowers with higher levels of student loan debt. Unfortunately, for many of these individuals, using credit cards to pay for daily, necessary expenses is a way of life, which makes the higher interest rates even more unmanageable. On top of the tens of thousands they are paying in student loan debt, they also must cover higher levels of debt when it comes to other financial obligations, largely because they have student loans.
The reason for this difference in fees has to do with the borrower’s debt-to-income ratio. The higher the debt to income ratio, the higher the interest rate will be. However, student loan debt is not the sole factor in determining whether the borrower will end up with a higher interest rate. If the borrower has missed payments on debts in the past, this, too, can hurt him or her when it comes to interest rates.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.