Facts About Student Loans

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At the end of March 2019, Americans owned $1.5 trillion in student loans, more than double what they owed a decade before. The rise coincides with historically high rates of college enrollment among young people in the United States, as well as rising higher education costs. Based on a Pew Research Center study of newly published data from the Federal Reserve Board's 2018 Survey of Household Economics and Decisionmaking, here are five facts regarding student loans in America:

1. About one-third of persons under the age of 30 owe money on student loans

According to the survey, 34% of persons aged 18 to 29 had outstanding student debts for their own schooling. (This includes those who are currently in deferment or forbearance on their loans, but excludes credit card debt, as well as home and other education loans.)

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When only young individuals with a bachelor's degree or higher education are included, the percentage of young adults with outstanding student debt jumps to 49%. Student debt is less prevalent among people in their later years. Student loan debt affects almost one-fifth of those aged 30 to 44 (22%), as well as 4% of those aged 45 and more.

While age inequalities may reflect the fact that older persons have had more time to repay their debts, another study has revealed that young adults are more likely to borrow money to pay for their education today than in the past.

According to the National Center for Education Statistics, almost six out of ten college seniors aged 18 to 24 took out loans for their education in the 2015-2016 school year, up from around half in the 1999-2000 school year.

2. In 2016, the amount due by students fluctuated greatly, notably depending on the degree earned

In 2016, the average borrower with student loan debt for their own schooling owed $17,000. The amount owing, on the other hand, varied greatly. A quarter of debtors with outstanding debt owed less than $7,000, while the other quarter owed more than $43,000. (It is not feasible to compute the amount owing in 2018 due to changes to the survey questions.)

This discrepancy may be explained in part by educational attainment. In 2016, the median self-reported amount due among borrowers of all ages with outstanding student loan debt among those with less than a bachelor's degree was $10,000.

Those with a bachelor's degree owed $25,000 on average, while those with a postgraduate degree owed $45,000 on average. In 2016, just a small percentage of students with student loan debt had six-figure sums. Only 7% of current debtors, or 1% of the adult population, had at least $100,000 in outstanding debt. Postgraduate degree holders were the most likely to have balances of $100,000 or more. 23 percent of individuals with a doctoral degree with debt reported owing $100,000 or more.

3. Young college graduates with student debts are more likely to report financial difficulties than those without loans

When compared to their counterparts who do not have outstanding student debt, student loan borrowers are more pessimistic about their own financial condition.

College graduates aged 25 to 39 who have debts are more likely than those who do not have loans to report they are either struggling financially or just scraping by (22 percent vs. 11 percent ).

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About three-in-ten young college graduates with outstanding student debts (32%) believe they are living well, compared to 51% of college grads of a comparable age who do not have outstanding loans.

4. Young college graduates with student debts are more likely than those without a bachelor's degree to live in a higher-income household

Student loans are a method for many young people to finance an education that might otherwise be out of reach. Despite the fact that these students must borrow money to attend, the investment may be worthwhile if it results in greater wages later in life.

Individuals between the ages of 25 and 39 who have at least a bachelor's degree with outstanding student debt have greater family earnings (the individual's plus their spouse or partner's) than those in this age range who do not have a bachelor's degree (regardless of loan status).

In comparison to 18% of those without a bachelor's degree, around half of young college graduates with student debt (52%) live in households earning at least $75,000. They are, however, less likely than young college graduates without outstanding student debts to attain this level of family income (64 percent).

(Family income takes into account more than simply an individual's personal gains from higher education, such as the fact that college graduates are more likely to marry.) About half of young people without a bachelor's degree (53%) live in households earning less than $40,000, compared to 21% of young college graduates who have student debt.

5. Student loan holders are less optimistic about the value of their degree than young individuals without student debt

About a third (36%) of persons aged 25 to 39 with at least a bachelor's degree and outstanding student loan debt believe that the expenses of their degree exceed the advantages throughout their lifetime. In contrast, 15% of recent college graduates who do not have any outstanding student loans believe that the long-term costs exceed the advantages.

In 2020, over one-third of all American students will be in debt to pay for college, with the average student loan debt reaching a new high of $38,792. According to the Federal Reserve Bank of New York, they owed a total of $1.58 trillion as of November 2021.

As any recent college student—or parent of a student—understands, earning a degree now necessitates a much greater financial investment than it did a generation or two ago.

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According to the College Board, the average cost of attending a public four-year university has increased by more than three times in the last three decades, and it has more than doubled at both private and public four-year institutions.

Savings and investments aren't enough for many Americans to cover their expenses. As a result, more students and families are turning to loans to fund their higher education, and the average student loan debt continues to rise.

Loan Balances On Average

According to the Federal Reserve, over 30% of all Americans who went to college took on some type of debt in order to do so. Student loans were by far the most popular method of borrowing (95 percent of those who hold education debt took out student loans).

Other kinds of borrowing, such as credit cards (21%), home equity lines of credit (4%), and other sorts of credit, were utilized by 26% of persons (12 percent ). Younger individuals are responsible for the majority of this debt.

According to Federal Student Aid, borrowers between the ages of 25 and 34 owed over $500 billion in federal student loans as of the fourth quarter of 2021. Adults aged 35 to 49 had significantly more debt, with $622 billion in student loan debt. Meanwhile, those aged 50 to 61 owe $281 billion in student loan debt.

Delinquencies Are Decreasing

According to the most recent numbers available from the Federal Reserve, 9% of people who took out student loans were behind on their payments, and 5.7 percent of total student loan debt was at least 90 days overdue or in default. However, owing to emergency relief provisions relating to student loan repayments that went into effect in March 2020, these figures really understate the situation.

Collections on defaulted student loans were stopped, and loan repayments were suspended as a result of these steps. The relief measures were extended by an executive order issued by President Biden on his first day in office, and the most recent extension has stretched the deadline to May 1, 2022.

According to data released by the US Department of Education in October 2017, about 27% of people who started college in the 2003–2004 academic year have since defaulted, according to Judith Scott-Clayton, an associate professor of economics and education at Columbia University and a former Brookings Institution expert. She estimates that if the present rate of increase continues, nearly 38% of debtors in that age group would fail by 2023.

Borrowers without a bachelor's degree have a tougher difficulty repaying their debts. Around 31% of persons who borrowed money but never finished an associate or bachelor's degree are behind on their obligations.

Despite the fact that persons with higher degrees are more likely to take on more debt, they are also more likely to pay off their student loans on time. Former college students with debts of less than $15,000 are overdue 21% of the time. Only 17% of persons with $15,000 or more in debt are behind on their payments.

Debt Cancellation's Economic Impact

The sheer magnitude of student debt is both a drag on the American economy and a burden on the millions of people who owe it. The federal government backs over 92 percent of student loan debt. Because of this, it has become a political problem. Several Democratic presidential contenders, including Sen.

Elizabeth Warren (D-Mass.) and then-Senate Minority Leader Chuck Schumer (D-N.Y.), proposed erasing some or all student debt during the 2020 presidential race. They said that rather than passing legislation, it could be done by a president's executive order. Senator Warren continues to press the administration to forgive up to $50,000 in federal student loan debt for each borrower in 2021.

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Debt Cancellation Benefits And Drawbacks

According to CNBC, Moody's Investor Service believes that eliminating student debt would provide a boost to the economy similar to tax cuts in the short run. It has the potential to enhance homeownership and small company formation in the long run.

According to research conducted by Bard College's Levy Economics Institute, debt elimination would increase real GDP by $86 billion to $108 billion per year. Analysts caution, however, that stating that the cost of your actions will be paid by someone else might lead to moral hazard.

As borrowers expect that forgiveness will continue, this might result in even larger student debt loads. Another viewpoint is that forgiving student loan debt would only offer a minor boost to the economy since the savings are realized in tiny quantities over time, depending on how much a borrower pays back monthly with full or partial forgiveness.

Here are some of the most frequently asked questions concerning student loan debt in the United States and the United Kingdom.

What Is The Student Loan Debt Rate In The United States?

According to the Federal Reserve, nearly 30% of all American adults will be in debt by 2020.

This number indicates the increasing value of a college diploma in obtaining a well-paying job. It also indicates how much college expenditures have risen in recent years.

What Is The Average Student Loan Debt In The United Kingdom?

In 2020, students graduating from British institutions owe an average of £45,000 in student loan debt. The total sum of outstanding loans is expected to be £141 billion by the end of March 2021. Only 25% of borrowers (full-time students) are expected to return their loans in full, according to the government.

What Are Your Options For Getting Your Student Loans Forgiven?

Currently, the US government will forgive, cancel, or discharge part or all of a person's student loan debt only in a few limited instances. Teachers in low-income schools and government workers may be eligible for a part of their debt to be forgiven.

Disabled individuals may be eligible for debt forgiveness. 21 The US Department of Education said in August that it will erase $5.8 billion in student loans for borrowers who meet the criteria for complete and permanent disability.

Those who believe they may be eligible for debt forgiveness should contact their student loan servicer, according to the Federal Student Aid Office. This is the firm in charge of loan repayments.

As previously stated, a government emergency relief measure put a hold on student loan repayments beginning in March 2020, with the deadline being pushed out to May 1, 2022. Collections on past-due payments have also been discontinued. This is a payment suspension, not a debt elimination or even a debt reduction.

Final Thoughts

The majority of college students want to get a degree that will significantly boost their earning potential after graduation. Even yet, many individuals will have to devote a significant portion of their wages to repaying student debt. This is a significant responsibility to bear, particularly before earning one's first professional income.

Student loan debt affects more than one out of every three young people. The average student loan debt for today's college grads is $29,800.

Since 2006, that number has quadrupled, and it shows no signs of slowing down. If the usage of student loans results in graduation and subsequent benefits, there is good news.

Numerous studies have shown that the typical college graduate earns much more than someone with merely a high school education. Furthermore, persons with a bachelor's degree have always had a lower unemployment rate than those without.

Amounts Of Student Loans

Total student loan debt was $1.5 trillion in 2015, second only to mortgage debt.
The number of student loan borrowers has increased to 45 million.
Total educational debt has more than tripled in the last 13 years.
In 2018, 65 percent of seniors who graduated from public and nonprofit colleges had student loan debt, with an average of $29,200 per borrower.
Bachelor's degree completers at public institutions borrowed an average of $26,900 in 2017
Bachelor's degree completers at private non-profit schools borrowed an average of $32,600 in 2017
Bachelor's degree completers at private for-profit schools borrowed an average of $39,900 in 2017

Lending To Students

Over 30% of individuals in the United States owe money on student loans.
Depending on the kind of four-year school (public, private, or for-profit), between 80 and 95 percent of students get financial help.
Depending on the kind of 2-year school (public, private, or for-profit), between 75 and 95 percent of students get financial help.
Politicians, particularly those on the left's front lines, are demanding the removal of 75 to 95 percent of all student debt.
The following interest rates apply to government loans disbursed on or after July 1, 2021, but before July 1, 2022: Undergraduate loans have a 3.73 percent interest rate, graduate direct unsubsidized loans have a 5.28 percent interest rate, and Direct PLUS loans have a 6.28 percent interest rate.

Defaulted Student Loans And Payment Plans

For students who attended public schools, the federal student loan default rate was 9.6%. (at last count – 2016)
Students who attended private non-profit institutions had a 6.6 percent default rate on federal student loans.
Students who attended for-profit institutions had a 15.2 percent default rate on federal student loans.

Student Loans And Wealth

The average net worth of American families in 2019 is $692,100, with a median net worth of $97,300. However, the typical millennial has a net worth of just $8,000 dollars.
In reality, student debt diminishes the net worth of millennials by 75%.
More than half of millennials are either dissatisfied or very dissatisfied with their financial situation.
Student debt repayment is the main financial challenge for 16% of young people.
35 percent of millennial college graduates do not have a credit card, and roughly 36% have no idea what their credit score is.
Those with a bachelor's degree had a 2.1 percent unemployment rate, compared to 3.9 percent for those with just a high school education.
Those with a bachelor's degree or more had a poverty rate of 4.4 percent, compared to 12.7 percent for high school graduates.

Conclusion

As you can see there is interesting research about student loans.

I trust you enjoyed this article on the Facts About Student Loans. Would you please stay tuned for more articles to come? Take care!

JeannetteZ

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