The topic of student loans is in the news nearly every day, and has evolved into a hot button political issue as talk of the “student loan debt crisis” heats up. While the U.S. is praised for the increasingly high number of people attending colleges, there is a lot of criticism and finger-pointing concerning the true economic cost of having a country mired in student loan debt. With all the talk, articles, and pundits, it helps to have a few concrete statistics to keep in mind. Here are six student loan statistics that are hard to believe are true.
Total U.S. Student Debt
The total amount of U.S. student loan debt is a staggering $1.3 trillion dollars. You read that number right – we’re talking thirteen digits. That’s the number reported by the Federal Reserve Bank of New York as of the end of 2016, and that number is continually rising. Why does it always rise? Most experts attribute the rise at least partially to expanded use of income-driven repayment plans for federal student loans, which limit borrowers’ payments in many cases to less than what the loans accrue in monthly interest. This negative amortization causes individual loan balances to rise over time, instead of decrease. It seems as though the national student loan balance is rising along with them.
Roughly a tenth of student loan borrowers are delinquent or defaulted on their student loans. In fact, the default rate for student loans is higher than any other category of debt, including mortgages, credit cards, and auto loans. This may be due in part to the high cost of higher education, which is for many people an investment only dwarfed by their home purchase (and in rare cases, not even then). The good news is, while income-driven repayment plans may be contributing to the rise in total debt, their increased use has been directly tied to a decrease in the national default rate, likely due to the wider availability of more manageable payment options. [Read more…]