In recent years, numerous studies and federal reports have shown that student loan debt has grown considerably, but the deepening obligations may also be leading many young people to be more proactive in dealing with those balances.
Some 56 percent of people enrolled in Sallie Mae’s Smart Option Student Loan plans are now paying into their outstanding debts while still in school, according to a report from the private student loan lender. Whenever someone enrolled in the program does so, the institution gives those students a total of 2 percent back in rewards. It has paid out some $2 million in awards since 2010, indicating that about $100 million in payments have been made by students still in school during that time.
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Further, those who make payments while still in school also receive the benefit of lower interest rates on their loans once they do graduate, and will likewise pay less interest overall than the students who choose to defer payments until graduation, the report said.
“Paying for college is a significant commitment for any family, and in many cases it is a student’s first opportunity to participate in a major financial decision,” said Charlie Rocha, senior vice president at Sallie Mae. “We’ve designed our loan program to promote financial responsibility by encouraging families not to wait until graduation to start loan payments, even nominal ones, and rewarding them for it.”
When these rewards payouts are made, the money goes into their Upromise accounts, and can be used in a number of ways, including going back toward their student loans, being moved into high-yield savings accounts or taken as a check to cover school costs, the report said. Since 2001, Upromise accounts have helped families transfer more than $17 million that helped to further pay down college students’ outstanding education loans.
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Student loans are just one type of debt young adults may have to deal with in their everyday lives. Other obligations can include credit cards and auto loans, and altogether, these debts can add up to be tens of thousands of dollars or more for the average borrower. As a result, many young people may find it difficult to establish their financial independence within just a few years of graduating from school.