Student Loan Debt Average

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It’s time to talk about the student loan debt average in America. Earning more money is usually linked to having a four-year college degree. At the same time, college tuition is rising, and more students are taking out federal and also private student loans to cover their education costs. Debt can have a negative impact on one’s career and personal aspirations… like being able to buy a home or a car.

So what are the student loan debt average numbers? Note that in this blog post we are discussing federal student loans, as well as private student loans, as being part of the student loan debt burden. Credit card debt, student loans, home equity loans, and other educational loans that students or their guardians may have taken out to pay for school are not included in this discussion of the student loan debt average.  

Overall, nearly $1.75 trillion in student loan debt was accumulated in the United States as of March 2022. At the end of March 2022, Americans had $141.5 billion in private student loan debt.

student loan debt average
Photo by CreditDebitPro

Americans owed $1.6 trillion in federal student loans during the same period. As of 2021, 96 percent of those with outstanding education-related debt had taken out a student loan in order to pay for their own educations. Non-housing debt accounted for 36.6% of total debt by the end of Q1 2022, with student loan debt being the largest contributor.

In 2022, the average amount of student loan debt for federal loans was calculated to be $37,358, according to data provided by the Federal Reserve. That works out to a total of 43.4 million borrowers carrying a balance of approximately $1.6 trillion in outstanding debt. However, the amounts that individual borrowers are responsible for paying back can vary greatly. The amount of debt owed can vary widely depending on borrower demographics such as location and educational attainment.

In 2021, the median amount of outstanding student debt for borrowers was somewhere between $20,000 and $24,999. This range of debt amounts was typical. Bachelor’s degree recipients in the year 2020 who graduated with student debt had an average debt of $28,400.  

These graduates came from both public and private nonprofit four-year schools. The average amount of student debt for those who graduated with a bachelor’s degree in 2020 from private, public, or nonprofit institutions of higher education ranged anywhere from $18,344 in Utah to $39,928 in New Hampshire.  

Between the years 1996 and 2012, the annual growth rate of the typical amount of student debt carried by graduates of bachelor’s programs offered by both public and private nonprofit educational institutions was approximately 4%. Around 2016 is when it reached a plateau.

Why Is There Such a High Amount of Student Loan Debt in the United States?

The large amount of money owed on student loans has skyrocketed over the past few decades, and the primary reason for this is that the costs associated with obtaining a higher education, such as tuition, fees, housing, and books, have increased at a much faster rate than average family incomes. Since 1971, the College Board has been compiling data on the fees charged by both public and private universities.

When the organization initially started keeping track of prices, the typical cost of a year’s tuition at a public university was $1,410 (equivalent to $8,730 in 2017 dollars). It was a manageable 15.6 percent of the median household income of $9,027, so many families were able to afford it without going into debt.

Regarding the year 2018, the situation looks very different now from what it did back then. The full costs of attending a public university for one academic year is currently estimated to be $21,370, which is equivalent to 34.8% of the median annual household income of $61,372. It’s possible that this is the reason why more than 70 percent of students who graduate with a bachelor’s degree today do so with significant student loan debt, and why many of these students find themselves in need of loan consolidation and refinancing.

student loan debt average

Impact of the pandemic on the plans for repaying student loans in 2022

During this period of high unemployment rates and a financial crisis, the federal government stepped in to make the process of repaying back the student loans more manageable. This initiative began with the Coronavirus Pandemic in the beginning of the year 2020. The United States government has made the decision to temporarily postpone the repayment of all federal student loans for the purpose of helping college grads save money.

This resulted in a temporary halt to the processing of payments for all federal student loans at the same time. Originally, this was going to end on the first of January in the year 2022. However, in order to give graduates additional time to restart their repayment plan, the Biden administration pushed back the deadline to May 1, 2022, making it possible for them to do so. For the duration of this forbearance period, borrowers of federal student loans are exempt from having to make monthly payments or accrue interest on their loans.

Federal Student Loan Debt

As mentioned above, there are two distinct categories of student loans: private, and federal. Let’s discuss federal loans for a moment. There were 43.4 million borrowers with federal student loans as of January 2022. This indicates that the United States Department of Education provides funding for these borrowers’ loans. In point of fact, the federal government is responsible for more than ninety percent of all student loans, and these loans are organized into three primary federal loan programs: 

  • Perkins Loans
  • Direct Loans
  • Federal Family Education Loans (FFEL).

Back in the year 1965, the Federal Family Education Loan Program (FFEL) was the first federal student loan program to be established. Despite the fact that this program was terminated in 2010 (which means that no new loans of this type have been given out since then), borrowers still have an aggregate total of $230 billion in outstanding debt related to the FFEL Program. 

At this time, the Direct Loan Program is being used for any and all new federal student loans. And there are three distinct types of Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. Eligibility for a Direct Subsidized Loan is determined by a student’s financial need as determined by the FAFSA (student or parent takes out the loan to fill in cost gaps after exhausting private loans).

Both subsidized loans, in which the government will pay all or part of your loan interest if you can demonstrate that you are in financial need, and unsubsidized loans are included in the federal loan program.

The majority of student debt, approximately 92%, is comprised of loans from the federal government.

In the academic year 2018-2019, the federal government provided student loans to a total of 42 percent of first-time, full-time students. The following are the interest rates that will be applied to federal student loans disbursed between July 2021 and July 2022: 3.73 percent for undergraduates

Graduate students who use direct unsubsidized loans have a 5.28 percent interest rate.

6.28 percent interest rate for graduate students and their parents who use direct PLUS loans

A moratorium was placed on the repayment of federal student loans beginning in March 2020, and it is scheduled to end in August 2022. In addition, the interest rate on outstanding federal student loan debt was lowered to 0%.

Are Federal Student Loans Being Repaid?

The form of loans known as direct loans accounts for approximately $1.05 trillion of the total student loan debt owed by Americans. When compared to the sum of $508.7 billion that was recorded just five years ago, this represents a significant increase. At this time, 52 percent of the debt incurred from direct federal loans is being repaid. Approximately eight percent of the loans have been defaulted on because the borrower has gone nine months or longer without making a payment. The remaining forty percent is “on hold” because of a variety of factors, including the following:

  • 13 percent of the positions are filled by students who are currently enrolled.
  • 11 percent are under a deferment and 11 percent are under forbearance.
  • A grace period applies to 5% of the total.
  • 1 percent of the population is categorized as “other.”

Many borrowers are able to postpone their payments through the use of forbearance and deferment because these options allow them to do so in the event that they are going through a period of economic hardship, such as unemployment or a medical emergency; they are serving in the military; or they are continuing their education through a fellowship, residency, or postgraduate study. The most important distinction is that during forbearance, interest will always be accrued, whereas during some types of deferments, it will not.

The current breakdown represents a significant shift from the one that existed during the third quarter of 2013, when 42 percent of federal student loan debt was in the repayment phase, 24 percent was held by students who were actively enrolled in an educational program, 13 percent was in deferment, 8 percent was in forbearance, 7 percent was in a grace period, 5 percent was in default, and 1 percent was categorized as “other.”

Will Federal Student Loans Be Cancelled?

The pandemic unquestionably had an effect on a great deal of different things, one of which was the student loan industry. Due to the CARES Act, the payments on federal student loans have been put on hold since March of 2020. However, the goal is to resume operations of these facilities on September 1st, 2022.

We spoke about the student loan debt in another article here.

The good news is that the interest rate has not been increasing while those payments have been put on hold. Logically, this means it would be an excellent time to continue throwing money at your federal loans because it will all go directly toward the principal! However, not everyone is making the most of the current circumstances. 

debt photo
Photo by Alan Cleaver

Private Student Loan Debt

Private student loans, also known as nonfederal loans, can be obtained from a variety of financial institutions such as banks, credit unions, state loan agencies, and other similar organizations. The average cost of a private student loan is higher, with interest rates reaching as high as 14.18 percent. Although private loans only account for about 8.4 percent of the total student loan debt as of January 2022, the total outstanding balance on private student loans across the country is still more than 140 billion dollars.

Even though private student loan debt accounts for less than ten percent of total student debt, there have been some concerning trends. Interest rates on private loans can be anywhere from twice as high to three times as high as those on federal loans. More than half of students who rely on private loans do not make full use of the federal loans that are available to them, and nearly a third of students do not take out any federal loans at all.

As of the beginning of March in 2022, almost 8 percent of outstanding student loan debt was comprised of private student loans. In 2021, approximately 88.7 percent of outstanding private student loan debt was for students enrolled in undergraduate programs. About 11.3 percent of outstanding debt from private student loans was held by graduate students. The fixed interest rates that are attached to private student loans can range anywhere from 3 percent to 13 percent. Between March 2014 and March 2021, the amount of private student loan debt carried by both current students and graduates increased by 47 percent.

In the academic year 2015-2016, thirty percent of undergraduates who had private student loans did not take out any federal loans at all, while thirty-three percent of undergraduates who had private student loans did not take out any of the federal loan dollars that were available to them. Interest rates are important, particularly as more time goes by.

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Student Loan Debt Average Payoff

Wow!, we now that we know that 45 million people in the United States are carrying student loan debt, let’s discuss how those people are paying it off (or not).

It takes American citizens, on average, 20 years to pay off their student loans, but in some extreme cases it has been known to take 45 years or even longer.

And because the average interest rate on student loans is 5.8 percent, a significant number of those borrowers (21 percent, to be exact) will see their loan balance increase within the first five years of having the loan.

Why would that be the case you may wonder? Well, if you choose to make the standard monthly payment of $393 on a student loan with an outstanding balance of $38,792 and an interest rate of 5.8%, it will take you 11 years to pay off the loan. In addition to that, the interest alone will cost you an additional $14,052.09!

Or, if it takes you about 30 years to pay off that same loan (which would result in a monthly payment of $227), you will wind up handing over a total of $43,526.30 in interest, which is more than the amount that you borrowed in the first place! Very painful in the wallet area!

And if you’ve been wondering whether or not the burden of student loan debt (not to mention all of that interest) is worthwhile, consider the following: 44 percent of students who graduate from high school will enroll in a college that requires four years of study. However, only about two-thirds of those students will actually graduate. And even if you don’t finish your degree after taking out a student loan, you’re of course still on the hook for repaying the loan plus any interest accrued on it.

The problem with people’s student loan debt is that they have to continue making payments on it long after they have graduated from their alma mater. The age group of 30–39 year olds in the United States has the highest amount of student loan debt, with a total of $504 billion, but the age group of 18–29 year olds is not far behind, with $357 billion worth of student loan debt. Even people in their 70s and older may still owe money on their student loans. 

In point of fact, they owe approximately $25 billion combined. However, it is unclear whether this total is the result of a degree earned later in life, outstanding loans from when they were younger, or money that they borrowed to pay for the education of their children or grandchildren.

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