With an overwhelming $1.2 trillion of student loans currently being service by students and graduates, it is no surprise that many young Americans are struggling to manage repayments on their student loans. Many young borrowers are seeking short term relief and turning to federal programs to help manage or postpone their repayments, but without timely repayments, many student loans will not be retired by their expected maturity dates, and will continue to be carried by Americas young professionals. Historically, student loans have been considered a low-risk investment for lenders; borrowers were investing in their education, and were expected to obtain jobs with strong and stable salaries, allowing them to service and manage their student loans. In May 2015, it was reported that the average student loan default rate fell to 1.3% from 1.9% in March 2013, suggesting that student loan borrowers were improving their servicing performance. However, rather than defaulting on their loans, it appears that borrowers are increasingly using income-driven repayment plans to better manage their financial obligations, as encouraged by President Obama. As a result, two leading credit agencies, Moodys Investors Service and Fitch Ratings, have announced that they are reviewing their ratings of over $40 billion worth of student loans, potentially re-rating these securities from top-rated AAA status to lower rated junk bond status. A Fitch rating designates the likelihood of the bond to meet its terms, which in every case includes meeting its final maturity payment, said managing director of Fitch Ratings, Michael Dean. He predicted, the market is going to react how it is going to react. Most predictably, lenders are likely to pull back from the student loan financing market and allocate their capital to alternative investments. What You Can Do To ensure the ongoing health of the student loan market, it would be beneficial for all student borrowers to make their scheduled monthly payments, and complete their repayment schedule by the loan maturity date. However, on an individual basis, this might not be so easy. Borrowers who are having trouble making their monthly payments due to their financial circumstances have the opportunity to look into student loan refinancing, which may allow them to restructure their federal and student loans into a more manageable arrangement with a new lender. The typical refinancing process allows a new lender to pay off all or some of a borrowers old student loans from an old lender, in exchange for a single, new loan from the new lender. American students often enter into commitments with lenders as young as 18 years old. After several years of education, its generally expected that their financial situation may have improved, and they may be eligible for more attractive loan terms and interest rates. In that case, student loan refinancing allows student loan borrowers to refinance their federal and private student loans once they have a stronger credit history and a promising employment outlook. Most students, graduates or professionals who refinance their student loans end up with lower monthly payments, a lower interest rate or APR, and/ or a lower total repayment amount due to a more competitive loan products from lenders. When refinancing, it is recommended that student loan borrowers investigate and assess their options, and find a loan that is right for them. Student loan borrowers often suffer from a lack of understanding on the consequences of defaulting on their student loans. Making on-time payments on your student loans is very important and can have a significant influence on your credit record. Lenders will often reward borrowers for on-time payments, benefiting both the borrower and the cosigner (if applicable for the student loan). If your student loan repayments are causing you concern, consider learning more about your options, such as student loan refinancing, to responsibly manage your financial situation. There are many student loan refinancing services available online that can quickly give you a transparent view on your options. To explore your refinancing options from multiple lenders, visitCredible -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
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