Are you one of the 44 million Americans with student loan debt who still needs to complete the Christmas wish list? If so, you might be able to ask for something you do not have yet. Receiving help from your family and friends with paying your student loans.
As 2016 college graduates walked across the stage with $16,000 in loans unpaid, monthly student loan payments are at the forefront of most Millennials’ minds. Parents and grandparents can simply write a check, similar to receiving Christmas money as a child, that can be used for student loan payments. But, in the 21st century, there are digital options now available to help receive the gift of student loan payments from anybody.
This is accomplished through crowdfunding. This method of fundraising is most popular with entrepreneurs trying to launch a new business or families accepting donations to offset medical expenses. People have listed student loan funding campaigns since crowdfunding platforms went live in the previous decade. But, as the cost of college and the emphasis to obtain graduate or professional training to remain a competitive job candidate has pushed the total student loan balance above $1.4 trillion, the popularity of these platforms has significantly increased and gradually being recognized by the national media spotlight.
A recent crowdfunding platform that is solely dedicated to tackling student loan debt with peer-to-peer gifting is LoanGifting. Gift payments can be made for aspiring college students, current students, or graduates via PayPal and no additional charges are passed onto the person making the gift.
Each gift goes directly to the loan servicer, which means Grandma or a complete stranger does not have to worry that the money will instead be diverted to a previously unfunded spring break trip. This last perk is what makes LoanGifting very attractive to fund seekers because it is very difficult to have contributions go directly to the loan service provider. In a sense, LoanGifting adds credibility to each individual for family members and total strangers seeking to gift student loan payments.
While LoanGifting is a pioneer in creating a crowdfunding platform solely dedicated to alleviating student loan debt, GoFundMe has helped raise over $20 million in education projects in 2015. While not all of those funds are earmarked for higher education expenses, it goes to show that people across the globe are ready to help lessen the increasing burden of rising education costs. In fact, GoFundMe even acknowledged a 4,547% increase from 2011 to 2014 with projects mentioning the word “tuition” in the title. Other crowdfunding sites with student loan causes have seen large upticks as well.
Of course, one downside to crowdfunding programs is administrative fees. The various platforms will keep approximately 5% of each contribution. This means you might only see $95 of a $100 contribution. If your relatives are planning to put money in your Christmas stocking this year for student loans, that method might be better so the entire gift amount can be applied to your student loans. But, these crowdfunding commissions can be worthwhile in order to receive money from friends and strangers with a giving heart.
Why Millennials like Gift Student Loan Payments
Approximately 70% of Millennials graduate with student loan debt and nearly 25% of all borrowers are currently in delinquent or default status. College is the most expensive cost most Millennials have encountered and student loan payments account for 20% of their typical monthly budget. As the average 2016 college graduate with $37,000 in student loans has a monthly payment of approximately $400, any assistance is appreciated.
In recent years, one of the most popular Christmas gifts for all age groups has been gift cards. People do not know what to buy someone who has “everything” so they purchase a gift card that the recipient can use at their favorite store or restaurant. Instead, the gift of student loan payments can help each graduate with their regular monthly payments, but a large enough contribution can help them pay off their loan ahead of schedule and save money for future expenses.
Is the Gift of Student Loan Payments a Good Idea?
Most likely, many of the 44 million Americans with student loan debt would be extremely grateful to receive any monetary gift to relieve their debt burden. Crowdfunding sites like LoanGifting, GoFundMe, and Generosity are helping generous Americans give to family members, friends, and strangers. As the entire world continues to become more digital, online payment platforms are going to grow in prevalence and popularity.
While the U.S. Department of Education has tried to address the issue of student loan debt through income-based repayment and federal loan forgiveness plans, the cost of higher education has been outpacing inflation for over 30 years now as college enrollment has increased and state funding has decreased. This means each college student is responsible for paying the increased cost of tuition to receive a college education. Starting salaries have remained relatively stagnant in recent years and new graduates have a harder time repaying their loans than any previous graduating class. Gift payments help provide relief.
What Else College Graduates Can Do
In addition to receiving gift payments from relatives and friends this Christmas, indebted college graduates can also take some other proactive efforts that might help entice family and friends to provide them financial aid. This can be accomplished by prepaying their loan balance by paying more than the monthly amount each month. By making additional payments, a loan with a standard 10-year repayment window that is paid off at least one year earlier can result in a savings of thousands of dollars in interest charges. Even contributing an extra payment once or twice a year will save a noticeable amount of money.
A second option that can benefit graduates with limited income is student loan refinancing. This option can extend the repayment period allowing a new graduate to establish their career and not tarnish their credit by missing payments. Even graduates with a sizable disposable income can also benefit from refinancing by obtaining a new interest rate that is lower than their original interest rate. This is another way to save money since making the same monthly payment as before, except with a lower interest rate, will allow you to prepay the student loan balance without having to spend any additional money. Prepayment and refinancing can both be a “self Christmas gift” in addition to any gift payments received from friends and relatives.
Author: Jeff Gitlen
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