Student loan debt is a crisis, but for graduates with technology, it’s not so scary.
Student loan debt has become a national crisis, and it is negatively impacting the lives of younger generations. Forbes found that in 2016, the average graduate already had just over $37,000 in loan debt. Worse, on average it takes people more than two decades to pay off student debt.
This is about more than just money. “There’s a lot of new research talking about how financial health aligns with physical health — they’re kind of tied together,” says Dickson Chu, executive chairman of online banking platform, Simple. “Imagine the mental weight that young people carry with that debt. It starts to influence all of their decisions.”
Taking a toll
That negative impact often begins early. “I knew my sophomore year of high school that I was going to have to take out student loans to make it to college,” says A.J., 27, who graduated in 2014 with a degree in PR and graphic design.
“What’s insidious about student debt,” says Chu, “is that unlike other forms of debt — say a car loan, where if you can’t afford to pay, the car gets repossessed — it’s like this permanent debt that you have to pay off no matter what. In some states, it won’t even be forgiven in bankruptcy court.”
Increasingly, however, graduates like A.J. are finding powerful new tools for managing their student loan debt.
“I wanted to be aggressive with my student loans,” he says. A.J. began using a feature offered by Simple called “Goals” to pay off his loan debts in five years. “[It] was perfect because it categorized what I spent money on, and it helped me identify when I was spending money where I shouldn’t be. And I also loved that it was completely fee-free.” A.J. is on target to pay off his loans in 2019.
A.J. isn’t alone in using these new technology-based tools to tackle student loan debt. Joshua M., a recent graduate with nearly $28,000 in student loans, freely admits he didn’t have a lot of experience budgeting and saving. “When I graduated I wanted to start making payments on my student debt — it was really easy to make one Simple Goal that I could use for the monthly payments. [Paying off debt] is slow going, but it’s been only improved because Simple has allowed me to keep track so thoroughly.” According to Chu, more than 50,000 student loan Goals have been created, with almost $200 million of funding.
While new technologies are helping graduates manage debt, Chu sees other untapped resources.
“Start to build some good financial management habits,” he advises. “Having an early appreciation for the value of money and compounding interest helps a lot. Do your research, too; there’s a remarkable amount of money that is available that people don’t think about — federal programs, different types of scholarships available. And remember, there are other avenues for paying down debt — loan consolidation and refinancing, putting an active repayment plan in place and loan-forgiveness programs.”
In the end, Chu is optimistic. “In the abstract, debt feels like a crushing problem, but there are avenues to address it,” he says. “Our mission is to help people feel confident with their money.”
For A.J. and Joshua, Simple provided a new sense of control over their debt. They are now free to move forward in their lives.