Right now, in the United States of America, the student loan deficit sits at $1.6 trillion.
Keep in mind, in 2004 the student loan balance was…drumroll…$345 billion.
Even back then (2004), the most stressful part of my college decision was not where I wanted to go, but how in the heck was my family going to afford college?
From 2004 to 2019 we witnessed a staggering 464% jump in the number of student loans owed, which is just alarming. But, this got me thinking, what are some other alarming student loan facts?
So I decided to put something together a list of the 20+ best student loan facts for 2020!
1. Student loans now total $1.6 trillion
Feel free to fact check me but in 2007 there was $516 billion dollars worth of federally funded outstanding student loans according to the U.S. Department of Education.
Mind you, that amount was spread out across some 28 million borrowers. Fast forward to the last quarter of 2018, and there were almost 43 million borrowers.
2. There are over 44 million student loan borrowers.
Part of the uptick in student loans boils down to simple math:
More borrowers, more student loan debt.
In 2007 there were 28 million borrowers. Fast forward to the last quarter of 2018, and there were almost 43 million borrowers, now we stand at over 44 million.
[Related: Why We Need Lending Limits]
While there is LOTS of good that can be said for having a college degree, (A simple search comparing a college graduate's income to non-college graduates proves this) what most people fail to recognize is there are a few fundamental problems with student loan lending.
More people with degrees devalue a degree. Which is why there has been an exponential increase in graduate degrees, however, that might be
3. 50% of student loan debt comes from graduate degrees…
Student loans have surpassed American credit card debt (about $500 billion ago). That being said, what many people don't know is that of the massive amount of student loan debt that is owed, 50% of it stems from graduate degrees.
According to the Survey of Consumer Finances, while graduate borrowers only account for 26% of borrowers, the amount they borrowed accounts for 48% of the student loan debt!
In other words – graduate degrees are expensive!!!
So while there might be more people with a bachelor's degree, the new advice for the 21st century has become, “You need to get a graduate degree.”
And colleges are aware of the demand for graduate degrees, hence the:
- Spotify ads for online MBA's and graduate degrees.
- Signage everywhere promoting “Go back to school for your next degree”
- The common misconception that another degree will fix financial issues, “Just go back to school.”
None of which (in most cases) offer federal assistance, hence the high borrowing rate to get a graduate degree.
Speaking of federal assistance…
4. Public Service Loan Forgiveness works 1% of the time.
What would you do if you went into a bank and asked for a loan and the clerk told you,
“You will have a 99% chance of this not working out.”
Would you take out the loan? Heck no!
Well, student loan borrowers who think Public Service Loan Forgiveness is a good idea should think again – because in 2019, 99% of the time PSLF didn't work out.
- 86,006 PSLF applicants applied in 2019
- 864 received approval for loan forgiveness
- 85,142 borrowers were denied…!
In order to qualify for PSLF borrowers must meet the required 10 years or 120 consecutive payment minimum and work for a qualifying employer in the public service industry.
Those attempting to qualify (with no guarantee) typically leverage income-based repayment (IBR) which is when the pay a pro-rated amount towards their student loans and even defer them (See #5).
Those who are denied 99% of the time are now responsible for their original student loan balance and the interest they just accrued for 10 years!!
If you think you have a shot at student loan forgiveness, make sure you know what is required in order to qualify for forgiveness!
(Yikes – this is why we elected to just pay off all $300,000 of our student loans)
What if you just defer your student loans?
Just because you defer your loans doesn't necessarily mean your interest won't count against you, which leads to fact #5:
5. Deferring your student loans can make matters worse.
Deferring student loans does not make them go away – contrary to popular belief.
When most adults are faced with a problem they tend to flee, avoid, forget, or embrace the problem. For student loan borrowers electing to go down the avoid or forget route – deferring student loan payments is an option – but not a good one!
However, deferring your student loan payments doesn't always make it easier, in fact, it can make your financial woes worse. Here is why:
- You're still responsible. Sometimes borrowers confuse deferment and forgiveness. Some even defer until they are eligible for PSLF (like student loan fact #4 above) only to get denied. Then they have 10 years of deferred interest to pay on!
- Payment plans are designed to pay loans back. If you start deferring your student loans, you will not meet the payment timelines. Therefore you will more than likely pay more in interest and pay your loans off over more time without making extra payments!
- You might save your credit, but you will hurt your wallet. If you have unsubsidized student loans, you are still responsible for the accrued interest. And with no payments, that student loan interest can grow quickly!
6. 1 in 3 don't know the difference between subsidized and unsubsidized student loans.
Imagine going to buy a car or home and blindly signing the papers for an amount and an interest rate you had no clue you were getting?
Seems pretty silly.
Well for 1 in 3 student loan borrowers, that is actually the case as they don't know the difference between subsidized and unsubsidized loans.
- Subsidized Student Loans = Government covers the interest while the borrower is in school, thus loans do not accrue interest for the borrower to pay.
- Unsubsidized Student Loans = Borrower is responsible for accrued interest during school.
As you can see in the chart below, not knowing the difference in how interest works for a loan is an issue.
If loans are unsubsidized, borrowers who are unaware don't realize their loan is actually growing every month. And while they're still in school, chances are they aren't making payments…
7. The average student loan payment is almost $400.
The most recent figures cite that half of all college graduates have an average of $40,000 in debt.
Other stats indicate that over 7 in 10 college attendees have at least some student loan debt. This all leads to this question, how much is the average student loan payment?
$393 to be exact.
According to the Federal Reserve, the most recent studies from 2017 (these things are not updated that often) found that the average payment is $393 per month.
So what does $393 per month look like?
- $4,716 annually
- $47, 160 if saved with no return for 10 years
- Almost a $10,000 emergency fund in two years
- Three $1,600 trips per year!
- Four cell phone payments
- Five sets of sporting event tickets each month
8. 6% (Up 1%) of borrowers have $100,000 or more in student loans.
Up 1%, the number of borrowers who have $100,000 or more (Like my wife did when she got her Doctorate) is also increasing and doesn't look like it intends to slow down any time soon.
The six-figure student loan group accounts for over 30% of the total student loan deficit, but ironically enough, they're the ones who can actually pay on time…
9. Two student loan borrowers out of 10 are behind on payments.
20% of student loan borrowers are behind on payments.
The often underlooked issue with this stat – most of the people missing payments don't even have a degree. The job market isn't as strong without a degree (statistically speaking).
So not only do these students not have a degree, they can't make their payments on time and they can't qualify to refinance their student loans.
10. Student loan payments have an average interest rate of 4.5%
11. Student loans have surpassed the monthly grocery bill for most young Americans.
Student loans cost more than food.
Not only are millennials and student loan borrowers spending more on student loan payments each month than food, but student loans also account for something else.
A 35% drop in homeownership among younger Americans is correlated to student loan debt.
12. 1 in 2 college graduates thinks their loans will be forgiven.
According to a Lendu Survey, 50% of college students said they thought their loans will be repaid one day.
Whether that is through PSLF or just forgiven/repaid altogether, that is a downright scary student loan fact.
While these numbers might not be able to be generalized across the student loan borrowing population as a whole, what is certainly true is this:
Upfront awareness and education on student loans are lacking.
Students graduating high school are unaware of what student loan ramifications can cause down the road… especially if they think they are just forgiven.
See Also: Why We Need Student Loan Lending Limits
13. The average physician is coming out of med school with over $200,000 in student loan debt.
Short on sleep and piled high in debt, our medical professionals are paying the price for college… and it's not just lost sleep.
The question physicians are now asking themselves is whether or not the salary is worth the debt. Statistics state the average medical degree to become a physician is now over $200,000.
What is even scarier…
Some articles like this suggest the number is actually close to $320,000.
We have spent the better part of almost four years focusing on paying off our student loans. I will say if you're in the medical world like my wife, get gritty for the next 2-3 years and delay the good. It's how we were able to pay off so much student loan debt.
14. $30,000 worth of student loans actually costs closer to $40,000.
When it is all said and done, a $30,000 student loan balance with an interest rate between 4-6% results in $6,500 – $10,000 in interest over the loan term.
Similar to how the amortization on a house ends up being significantly higher than what we might anticipate – a $300,000 house costs over $500,000 after 30 years – the same goes for your student loans.
While perhaps your student loans are not as extreme, at the end of the day something you want to consider is paying off your student loans early!
- Paying off your student loans early saves money in the long run
- One extra payment per year can save you $100's in interest
- You will want to improve your Debt to Income Ratio so you can buy a home one day!
15. Less than half of all college students are graduating on time!
Only 41% of students are graduating within 4 years, resulting in more college, therefore more student loans.
Why English 101 doesn't transfer from one college to another I will never understand, but if you recongize that most colleges are money-making machines, it will shed some insight.
16. Over 60? Student loans for the 60 over crowd has surpassed 60 billion.
While the majority of student loan debt belongs to the age group 30 and below, student loans don't segregate by age.
The 60+ crowd has quite a bit of student loans themselves. And when the 30-year-olds of today are 60, well that number might be even higher!
17. For-profit colleges: 230+ Billion
For-profit colleges let students borrow money, just like any other college.
And over the last 15 years, they have contributed heavily to the student loan debt deficit, growing from 40 billion to 230 billion.
*If you're someone considering a for-profit college, please make sure the degree will land you a job and do your research. It is typically best to pay as you go if possible!
18. Don't Consolidate Student Loans
Consolidating your student loans will actually cause you to pay more money in the long run, contrary to popular belief.
Instead of working with a bunch of small fires, imagine trying to use the same garden hose and putting out one massive fire! In short, while more and more are consolidating their student loans for lower monthly payments, they will end up paying more in the long run due to interest!
19. The right college degree is valuable.
Not all student loan debt and student loan news is bad. That is crazy to think, but at the end of the day, the truth to the matter is this:
Someone with a bachelor's degree will outearn someone with just a high school diploma over their lifespan.
While this last statement has numerous layers outside of just education, recent data from an Inside Higher Ed article shows that someone with a bachelor's degree on average will make $30,000 more per year than someone with a high school diploma.
So while student loan debt can be cripiling and it needs to be viewed as an investment long term due to the growing tuition costs, a degree is still valuable when it comes to making money!
20. The sheer harsh reality about student loans is this:
The real cause of the student loan debt crisis is clear… liquidity provided by the federal government enables colleges and universities to raise their prices.
If you don't understand student loans like I do don't worry, as long as you get this last key student loan fact you will be OK.
Supply and Demand.
There is a huge need for college (demand) and there are colleges waiting to offer their services (supply). The loans for most students in undergraduate levels are federally funded, and the interest paid on those loans goes to…
You got it – the federal government. Here is the cycle:
- With federal funding for colleges becoming less and less, colleges raise tuition to cover their expenses.
- Students in need of funds to cover their college tuition get student loans
- Federally funded student loans are provided and charged an interest
- Knowing there are very few limits to lending, colleges compete with one another for admissions
- In order to compete, they raise prices
- And lastly, students pay the ultimate price
- If you want to read about why college tuition is so high, here is a great article.
My key takeaways for student loan borrowers in 2020:
It's time to be really super honest with ourselves. Now in some instances, I am preaching to the choir so to speak, but one thing we can all do is make sure future college enrollees don't get into massive amounts of student loan debt.
That first starts with asking high school students these series of questions:
- Will your major actually lead you to a sustainable job that affords the lifestyle you desire?
- Are the other ways to afford college other than financing every aspect form tuition to housing?
- Is military, trade school, or community college a better option long term?
Granted, maybe someone really wants a vocal performance master's degree, but the chances of that paying super well are pretty slim. This is why parents who are reading this need to be honest with their kids and separate emotions and feelings when making college decisions!
However, in most cases, it can be too late for some of us – we have already completed college and now we are wondering what to do with all the student loan debt.
We can't go back and work during the summers, return the $100 hoddie from the school book store or enroll in a community college… so what are the options?
- Start by getting a free copy of our student loan guide that will help you pay off your student loans – the right way for YOU.
- Be mindful of refinancing student loans and be sure to weigh both the pros and cons of refinancing!
- Really make sure if you are currently debating going back to college if that is the true answer to your current problems.
Sometimes the best option is not “What we need to do,” but instead, “What we shouldn't do.” Hopefully, these student loan facts are eye-opening so we can all go make a difference!
Q: What do you think about these student loan facts?
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! I got serious with money when I used Personal Capital to track my finances.