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.
Number of Borrowers
Over 40 million Americans now have student loans. In fact, student loan debt trails behind only mortgage debt in terms of national size. To put the number in perspective, the U.S. Census Bureau puts the U.S. population at roughly 319 million as of the end of 2014. That means about one in eight Americans, young and old, are borrowers. When the demographic of ages 0-17 is eliminated, the percentage grows significantly. The bottom line: America is increasingly a nation that is financing its pursuit of higher education.
There are two statistically different numbers here that are often conflated. One is the average debt per graduate, and the other is the average debt per borrower. Students who graduate with student loan debt do so owing an average of around $16,000. However, many students borrow for their education but never finish their degree, and when those borrowers are added in the average debt loan is significantly higher, at around $28,000. This is a troubling contrast because it shows that non-graduates tend to borrow more money than graduates do, even though, as non-degree holders, they are in a worse position to repay those loans. Interestingly enough, although the average debt at graduation is only about $28,000, the average amount that borrowers refinance, if they choose to and are approved, is about $54,000 according to LendEDU.
Average Monthly Payment
The average monthly payment for a student loan borrower is a hefty $351. Keep in mind, though, that this is an average and there are many payments larger and smaller. In addition, monthly payments are growing smaller on average as a result of borrowers who are taking advantage of the Federal Government’s many income-driven repayment plans, which limit monthly payments to either 10% or 15% of disposable monthly income. A related statistic can help put this one into perspective: the median (compared to the average) monthly payment for a student loan borrower is $203.
Moving Back Home
Up to 30% of student loan borrowers move back in with their parents after school. While this may seem shocking at first glance, it isn’t so surprising when the likely reasons behind this statistic are considered. Graduates with high student loan debts are starting off what is traditionally thought of as adulthood with a sizeable handicap: monthly student loan payments. So, it’s not such a surprise that many will chose to double-up their living conditions while attempting to fast-track repayment of their loans. Still other borrowers may be moving back home because they aren’t finding post-graduation employment that can sustain them financially. This scenario is one experts in the economy have long recognized, as jobs that once required a high school degree now require a B.A. or B.S., and jobs that formerly required a four-year degree now look for candidates with masters and doctorates. The rise in higher education has correlated in recent years with higher degree expectations in the workplace.