What is Average Student Loan Debt?
Student loans are the fastest-growing debt in the United States. Student loan debt is currently at an all-time high of $1.58 trillion, with over 45 million Americans having student loans. Wowza! Most college students (65%) finish with student debt. In addition, the average student loan debt per borrower is $38,792, with a $393 monthly payment.
That’s only a taste of what’s going on with student loans in the United States today. Continue reading for the most up-to-date student loan research, which includes:
- Debt from Federal Student Loans
- Student Loan Debt in the United States
- Debt from private student loans
- Student Loan Repayment Rates
- Debt owed on student loans by age
- Over Time, Average College Tuition vs. Debt
- Student Loan Debt’s Consequences
- Forgiveness of Student Loan Debt
Debt from Federal Student Loans
Federal and private student loans are the two types of loans available. As of January 2022, 43.4 million borrowers had federal student loans, which means the US Department of Education is funding their loans. In reality, federal student loans account for more than 90% of all student loans, and they are divided into three categories: Direct Loans, Federal Family Education Loans (FFEL), and Perkins Loans.
In 1965, the Federal Family Education Loan Program (FFEL) was established. Even though this program was terminated in 2010 (and no new loans have been issued since), debtors still owe $230 billion in FFEL Program debt. The Direct Loan Program now provides all new federal student loans. Direct Loans are divided into three categories: Subsidized Direct Loans (based on FAFSA financial need), Unsubsidized Direct Loans (no proof of financial need), and Direct PLUS Loans (student or parent takes out the loan to fill in cost gaps after exhausting private loans).
For each significant type of federal student loan, here’s a breakdown of the amount owing and the number of borrowers:
Interest Rates on Federal Student Loans
Federal loan interest rates fluctuate over time and are dependent on loan type and distribution date (aka the date when funds are given to the borrower). The lone exception is Perkins Loans, which have a fixed rate of 5%.
Because of the CARES Act, federal student loans have a 0% interest rate for the time being. After that, the following interest rates will apply to Direct Loans issued between July 1, 2021, and July 1, 2022:
- Direct Subsidized and Direct Unsubsidized Loans have a 3.73 percent interest rate for undergraduate borrowers.
- Parents and graduate or professional students can get 6.28 percent with Direct PLUS Loans.
Student Loan Debt in the United States
The pandemic significantly impacted many things, including the student loan sector. Since March 2020, federal student loan payments have been halted due to the CARES Act. The goal is to restart them on September 1, 2022.
The good news is that interest hasn’t increased while those payments have been suspended, so now is a beautiful time to keep paying off your federal loans because everything goes to the principal! However, not everyone is making the most of the circumstances. Here is the current state of federal student loan debt as of 2022 Q1 (including Direct Loans and FFEL Program loans held by the Department of Education).
Still a student:
Students who are still in school do not have to pay back their debts.
Period of Grace:
Students are given six months following graduation to begin making payments (except for PLUS undergraduate loans).
Repayment in Progress: The account is in progress, and payments are being made.
Deferment:
Payments are delayed due to financial difficulties, military duty, or returning to school; interest may or may not accrue.
Forbearance:
Payments have been suspended, and interest is still accruing. Because of the CARES Act, most student loans are presently in forbearance.
Default:
This contains over 360 days past due before the CARES Act contains debts
Even though approximately 1% of federal student loan accounts are inactive repayment, it is unknown how many people have kept up with their payments during the pandemic. As a result, the end of student loan forgiveness will be a rude awakening for most people
Debt from private student loans
Banks provide private student loans (also known as nonfederal loans), credit unions, state lending agencies, or other financial organizations. Private student loans are typically more expensive, with interest rates reaching 14.18 percent. Private student loans account for around 8.4% of overall student loan debt as of January 2022, although the national private student debt is still above $140 billion.
Student Loan Repayment Rates
So, given that 45 million Americans have student loan debt let’s talk about how they’re paying it off (or not).
Paying off student loans takes the average American 20 years, but it might take 45 years or more. With an average student loan interest rate of 5.8%, many borrowers (21%) saw their loan debt increase over the first five years.
How does that appear in real life? It will take 11 years to pay off a $38,792 student loan at 5.8% interest if you make the average monthly payment of $393. You’ll also have to pay $14,052.09 in interest!
Alternatively, if you take 30 years to pay off the same debt (at a $227 monthly payment), you’ll pay $43,526 in interest—more than the original loan amount! Ouch.
If you’re thinking about whether student loan debt (and all that interest) is worth it, consider this: Only about two-thirds of high school graduates will attend a four-year college, according to the National Center for Education Statistics. If you take out a student loan but don’t finish your degree, you’ll still have to pay it back—plus interest. Oof.
Debt owed on student loans by age.
The problem with student loan debt is that it keeps people paying for college long after graduating. With a total debt of $504 billion, Americans aged 30–39 have the most student loan debt, but the 18–29 age group isn’t far behind, with $357 billion in debt. Even those in their seventies aren’t entirely debt-free. In reality, they owe nearly $25 billion in all. However, it’s unclear if this sum comes from a later-in-life degree, residual student loans, or money borrowed to send their children or grandchildren through school.
Over Time, Average College Tuition vs. Debt
The National Defense Education Act of 1958, which aimed to increase higher education attendance (specifically in science, math, and foreign languages), is the most likely reason for the increase in college students from 3.6 million in 1960 to 7.5 million in 1970.
However, college attendance isn’t the only thing that has increased throughout the years. Student loans, as previously stated, are the fastest-growing kind of debt in the United States. In fact, since the Great Recession in 2007, we’ve witnessed a 157 percent increase. Student loan debt is continually increasing due to higher tuition (more than double what it was 30 years ago), inflation, or more social pressure to obtain a college diploma.
Over the last 30 years, the general cost of living has grown, with higher education prices growing far faster than other categories such as health, housing, and food. Education costs have increased by more than 436 percent since 1994. And as you might expect, higher tuition and rising living costs contribute to an increase in student loan debt. Students are more enticed than ever to take out student loans without considering the actual cost.
These figures may seem daunting (especially if you’re a high school student or have children attending college soon), but there is hope. Remember that 1) there are high-paying occupations that don’t require a degree and 2) even with escalating costs, there are methods to earn a debt-free degree.
These figures demonstrate the severity of the student loan crisis, but you don’t have to become another statistic.
Student Loan Debt’s Effects
Student loan debt impacts people’s lives beyond their financial situation.
Because of their student loan debt, 47 percent of young adults have bought a home, and 21% have even put off getting married.
27 Furthermore, 60% of individuals with a college diploma and student loans say their retirement savings are behind schedule.
Not to mention the $25 billion owed by individuals aged 70 and up. Some Americans are still paying off school loans in what should be their golden years of retirement.
According to our quarterly research, 71% of individuals who took out student loans to pay for education wish they had received more information about the debt before taking it on.
Over half (53%) of those who took out student loans regret doing so, while 43% of those who did not take out student loans regret going to college. Despite this, students are encouraged to do anything to obtain a college diploma, including borrowing money.
In addition, 22% of borrowers who graduated in the 2015–16 academic year reported difficulty paying student loan payments during their first year out of college. Not to mention that just 40% of college graduates found a paying job within the first year of graduation, and 44% accepted jobs outside their field of study.
Forgiveness of Student Loan Debt
With so many Americans burdened by student loan debt, everyone expects their debt to be canceled. But, after promising to forgive at least $10,000 in student loan debt per borrower throughout his campaign. President Biden has yet to deliver on that pledge.
Since becoming in office, Biden has forgiven almost $15 billion in student loan debt for specific borrowers. However, most of this was accomplished by enforcing or altering already-existing federal student loan laws that safeguard disabled borrowers, students who graduated from closed schools, and persons who work in government.
It’s also unclear if the president may use an executive order to cancel student loans. It would almost certainly require legislation from Congress. And the chances of both parties agreeing on broad student loan forgiveness are slim.
Forgiveness Programs for Student Loans
As of right present, the three most frequent student loan forgiveness schemes are Teacher Loan Forgiveness (TLF). Public Service Loan Forgiveness (PSLF) and Total and Permanent Disability Discharge (TPD). But borrowers have to meet exact standards to apply for these programs, including never missing or being late on a single student loan payment. Furthermore, the acceptance rates for these forgiveness schemes are minimal. Between November 9, 2020, and September 30, 2021, only 9,038 Public Service Loan Forgiveness applications were received. (2 percent).
