Students preparing to graduate are well aware that degrees come with a hefty price tag. But just how much student debt are Americans taking on?
According to the Federal Reserve, the rising national student debt currently sits at over $1.4 trillion as of the second quarter of 2017. There are over 44 million Americans carrying a student loan debt. Reaching a record high for the 18th straight year, this debt threatens to hobble generations of graduates.
Only about a decade ago, students left college with about $20,000 in loans. In 2015, the average student had tacked on an extra $14,000 for a total of $34,000 — a 70% increase. Today, student loans are part and parcel in the pursuit of higher education.
Student loans are designed to help future graduates tackle the costs of tuition, living expenses and everyday life so they can focus on putting their pencils to paper in school.
You can typically put student loans toward any education-related expense:
| Type of federal loan | Type of student | Fixed interest rate for loans disbursed after July 1, 2018 |
|---|---|---|
| Direct subsidized loans | Undergraduate | 5.05% |
| Direct unsubsidized loans | Undergraduate, graduate or professional studies | 5.05% – 6.6% |
| Direct PLUS loans | Parents and graduate or professional studies | 7.6% |
| Perkins loans | Undergraduate, graduate or professional Studies | 5% |
Direct subsidized loans for graduate and professional students came with a 6% interest rate, while Direct PLUS loans had a 7% interest rate. Perkins loans rates stayed at 5%.
Among all totals borrowed, students are taking out a range of loan amounts to meet their educational needs. The largest group, comprising more than 12 million people, borrows between $10,000 and $25,000. Over 400 thousand people are the outliers, borrowing upward of $200,000.
| Balance in 2015 | Number of borrowers |
|---|---|
| $1 to $5,000 | 8,960,200 |
| $5,000 to $10,000 | 7,740,700 |
| $10,000 to $25,000 | 12,434,400 |
| $25,000 to $50,000 | 8,319,600 |
| $25,000 to $50,000 | 8,319,600 |
| $50,000 to $75,000 | 3,341,100 |
| $75,000 to $100,000 | 1,350,800 |
| $100,000 to $150,000 | 1,116,500 |
| $150,000 to $200,000 | 500,400 |
| $200,000 or more | 415,400 |
As time moves on and more people go to school, they’re taking on more substantial student debt. The Federal Reserve Bank of New York reports that every generation’s average student loan balances have increased by 256% overall in the past 10 years.
Students younger than 40 account for 65% of borrowers, a generation that’s grown its loan balances by about 200% since 2004. Borrowers over 60 have jumped their borrowing by a full 1,000% since 2004.
| Year | Under 30 | 30s | 40s | 50s | 60s |
|---|---|---|---|---|---|
| 2004 | $146 | $114 | $49 | $31 | $6 |
| 2006 | $194 | $154 | $69 | $48 | $13 |
| 2008 | $248 | $202 | $96 | $67 | $20 |
| 2010 | $299 | $257 | $127 | $91 | $29 |
| 2012 | $320 | $320 | $163 | $113 | $43 |
| 2014 | $369 | $383 | $208 | $136 | $58 |
| 2015 | $376 | $408 | $229 | $149 | $66 |
Today, 44 million students of all ages take out student loans to cover the cost of secondary education. The largest group of borrowers are under 30 and make up 40% of all people carrying student loans. Since 2004, students under 30 have nearly doubled in number of borrowers — from 11.3 million to 17.3 million today.
The second largest group of borrowers are students in their 30s. They comprise about 27% of the borrowing pool. Students in their 40s and 50s make up about 27% as well, followed by the 6% of borrowers who are 60 or older.
| Year | Under 30 | 30s | 40s | 50s | 60s |
|---|---|---|---|---|---|
| 2004 | 11.3 | 5.7 | 3.2 | 2.1 | 0.6 |
| 2006 | 12.9 | 6.7 | 3.9 | 2.8 | 0.9 |
| 2008 | 14.2 | 8.0 | 4.4 | 3.5 | 1.3 |
| 2010 | 16.2 | 9.6 | 5.3 | 4.2 | 1.7 |
| 2012 | 15.1 | 10.9 | 6.0 | 4.7 | 2.2 |
| 2014 | 17.4 | 11.8 | 6.5 | 5.0 | 2.6 |
| 2015 | 17.3 | 12.1 | 6.8 | 5.2 | 2.8 |
Looking at trends since 2004, you’ll see that the majority of borrowers are having trouble decreasing their student loan balances. Only about 16.7 million of the 44.2 million borrowers are able to stay on top of their loans and lower their balances through regular repayments.
In 2015, 46% of borrowers had the same or higher balance than the previous quarter due to accumulated interest. 10% of students defaulted on their loans in 2015, and since 2004, the number of borrowers in default has quadrupled. With these figures, note that the number of borrowers overall doubled from 2004 to 2015.
| Year | Current balance lower than previous quarter | Current balance same or higher than previous quarter | 90+ days overdue | Default | Total # of borrowers |
|---|---|---|---|---|---|
| 2004 | 8.7 | 12.0 | 1.0 | 1.1 | 22.9 |
| 2006 | 10.3 | 14.0 | 1.3 | 1.7 | 27.3 |
| 2008 | 12.5 | 15.0 | 1.6 | 2.3 | 31.4 |
| 2010 | 14.1 | 18.0 | 2.0 | 3.0 | 37.0 |
| 2012 | 15.2 | 17.0 | 2.6 | 4.1 | 38.9 |
| 2014 | 16.4 | 19.9 | 2.4 | 4.6 | 44.3 |
| 2015 | 16.7 | 20.4 | 2.4 | 4.7 | 44.2 |
Number of borrowers in millions.
Don’t sacrifice your financial future when paying for your education. Stay on top of your student loans and avoid unnecessary interest by paying your loan installments by their due dates.
Regular repayments can ultimately improve your credit score. They let lenders know that you’re a trustworthy, less risky borrower when you’re in the market for a future car, home or personal loan.
Use these tips to take charge of your student loans:
With over 7 million of the U.S. population having defaulted on their student loans, recent graduates are desperate to land themselves in a high paying job in order to start paying off their student loans. However, a higher income is not the only way you can accelerate the speed at which you pay off your student loan.
Opting to work for the government or specific nonprofit organizations can result in your federal student debt (95% of total student debt according to Federal Student Aid) being forgiven after 10 years if you meet the right conditions.
After you’ve made 120 qualifying monthly payments under a qualifying repayment plan – while working full-time for a qualifying employer – the Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans.
Although the program is only applicable on Direct Federal Loans and not on Federal Family Education Loans or Perkins Loans, they can still be forgiven if you consolidate them into a Direct Federal loan.
Qualifying monthly payments:
Qualifying repayment plan:
Any income-driven repayment plans (plans where your monthly payment is based on your income)
Qualifying employer:
Qualifying federal student loan:
Any non-defaulted loan received under the William D. Ford Federal Direct Loan (Direct Loan) Program.
| Public Service Loan Forgiveness (PSLF) Program | Without Public Service Loan Forgiveness (PSLF) Program | |
|---|---|---|
| State | New Hampshire | New Hampshire |
| Loan type | Federal Direct Unsubsidized Loan | Federal Direct Unsubsidized Loan |
| Fixed interest rate for Direct Loans | 4.45% | 4.45% |
| Loan amount | $38,000 | $38,000 |
| Loan term (months) | 120 | 132 |
| Weighted average income of people with at least some college credits | $54,000 | $54,000 |
| Repayment plan | PAYE | PAYE |
| Total amount paid | $43,878 | $48,532 |
Potential amount saved: $4,654 – that’s 12% of your original loan of $38,000
Potential time saved: 12 months
Some companies are willing to offer incentives to potential graduate employees to assist them in paying off their student loan debt.
A poll of 3,227 HR professionals by SHRM found that 4% of employers offer employer-provided student loan repayment assistance. Finding the right employer can help you reduce the amount of time needed to pay off a student loan significantly. However, these payments aren’t exempt from payroll or income tax.
Companies such as Aetna, Fidelity, Natixis Global Asset Management and PWC offer their employees a lifetime maximum of $10,000 towards their student loans. Nvidia offers a maximum of $30,000 – that’s potentially 79% of a $38,000 loan! Other companies will offer a certain capped amount each year until the loan is paid off.
Organizations such as SponsorChange offer direct student loan payments in exchange for volunteers who complete skill-based projects. While volunteer work isn’t technically employment, this is another avenue through which your time and services can result in money being directed toward reducing your student loan. Plus, volunteer work will look great on your resume.
In addition to doing something positive for the community, you’ll be paying off your student debt in the process.
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Kyle Morgan is a producer for finder.com who has worked for the USA Today network and Relix magazine, among other publications. He can be found writing about everything from the latest car loan stats to tips on saving money when traveling overseas. He lives in Asbury Park, where he loves exploring new places and sipping on hoppy beer. Oh, and he doesn't discriminate against buffalo wings — grilled or fried are just fine.