Student debt topped 1 trillion dollars in 2015, nearly tripling since the last recession.
There are a lot of reasons for that but it means that millennials are delaying big decisions like marriage and home ownership.
That also means that the quickly recovering housing market could face a bit of stall once again when the first-time homebuyer market slows. That could affect those home sellers who want to move into their second home who were hoping to sell to a nice millennial couple. Of course, all this is on a national level. In northern Colorado, we haven’t seen this consequence affect the market much since we still have low inventory, low unemployment.
But the good news is that, according to RIS Media, the Department of Education has revised the PAYE Program (Pay as You Go) allowing students to pay up to 10% of their income towards their bill and no more. Called REPAYE, it also includes all school loans in the benefit that allows students for the rest of their loan to be forgiven after 20 years (undergrad) and 25 years for a graduate program.
There are a couple of issues that could cause problems for the borrower. If the payment is too low to cover the both interest and principal, the loan will keep growing and the student ends up paying way more than the initial loan. If a part of the loan is forgiven, there are tax consequences but there is a proposal that makes forgiven student loan balances tax free but it will require congressional approval.
Borrowers now have up to eight programs to choose from when trying to figure out how to pay back the biggest student loan debt ever accumulated. With some good budgeting and research, millennials will still be able to buy their first home before it’s time to retire.
For more information, go to www.studentloanhelp.org