Five Facts on Student Loan Debt

Five Facts on Student Loan Debt

Over the last three decades, the average tuition at both public and private four-year colleges has more than doubled, even when adjusted for inflation. This has helped fuel the rise in student loan debt, a politically contentious issue shaping up to play a major role in this year’s presidential election.

Here are Five Facts on student loan debt.

  1. Total outstanding student loan debt in the U.S. exceeds $1.75 trillion.

With more than 60 million Americans owing some amount of public and private student loan debt, this works out to an average of roughly $28,950 owed per borrower. However, this debt isn’t evenly distributed – seven percent of borrowers owe in excess of $100,000, and collectively hold about one-third of the total debt.

  1. The Biden administration has forgiven a total of $167 billion in student loans, affecting 4.75 million borrowers.

Initially, the Biden White House put forth an ambitious plan that would have forgiven up to $20,000 in debt per eligible borrower, totaling more than $400 billion in debt relief. In 2023, this proposal was struck down by the Supreme Court. Since then, the administration has turned to a piecemeal approach to debt relief, most notably the income-driven repayment “SAVE” Plan and recently announced “New Plans” that are targeted at helping particularly vulnerable borrowers. Estimates by the Wharton School of the University of Pennsylvania tally the combined costs of these new proposals at a combined $559 billion over 10 years.

  1. Higher levels of student loan debt are corelated with lower rates of homeownership and entrepreneurship.

Rising student debt has led to fewer new small businesses founded by young people, which are vital for economic growth. The debt increases debt-to-income ratios and reduces available cash, making it harder to secure business loans. Additionally, higher student loan debt has been linked to lower homeownership rates, with estimates suggesting each $1,000 of debt reduces homeownership by about 1.8 percent among public four-year college attendees.

  1. More than 8 million Americans were in default on their student loans as of September 2021.

A significant portion of these defaulters, detailed in data from the Department of Education were Pell Grant recipients (67 percent). This is notable as Pell Grants are a class of grant provided by the federal government for students in exceptional need of financial aid or are the first in their family to go to college. Similarly, a majority had not completed their academic programs (62 percent). Older borrowers, particularly those over 50, represented a substantial portion of defaults, despite making up a smaller percentage of total borrowers. Only a small fraction of defaulters had taken out graduate loans or were over 62 years old, yet they accounted for a notable share of defaults.

  1. Only 22 percent of U.S. adults say college is worth the cost if it requires taking out loans, according to a December 2023 Pew study.

In contrast, the study found that 47 percent believe college is worth the cost only without taking loans, while 29 percent believe college is never worth the cost. This comes on the heels of a 2019 Federal Reserve study which found that the wealth and income boosts provided by a four-year college degree has been eroded due in part to the rising burden of student debt.