| Student Loans Snapshot | |
|---|---|
| $1.6 trillion | Amount of student loan debt outstanding in the U.S. |
| 43.2 million | Number of borrowers with federal student loan debt. |
The total amount of outstanding student loans was $1.6 trillion in the fourth quarter of 2023, up from just over $1 trillion a decade ago. This equates to approximately $37,037.04 per borrower.
Average Loan Balances
According to the Federal Reserve’s 2021 and 2022 data, 30% of all U.S. adults took on some form of debt to go to college. Student loans were by far the most common borrowing option: 96% of those who hold education debt took out a student loan. But borrowers took on other forms of debt to finance their degrees, including credit card debt (19%), home equity lines of credit (4%), and other types of credit (11%).
The issue of student loan debt cuts across generations. As of the fourth quarter of 2023, borrowers between the ages of 25 and 34 held $491 billion in federal student loan debt. Adults aged 35 to 49 carried even more debt, with balances totaling $624 billion. People ages 50 to 61 owe about $278 billion in student loan debt. Another $110 billion is held by those 62 and older.
Those who get advanced degrees tend to accumulate more debt but are also less likely to fall behind on their student loan payments. Meanwhile, borrowers who obtain a technical degree or never graduate are more likely to have a harder time keeping current with their payments.
A 2022 Federal Reserve survey of U.S. households found that 28% of respondents who took out student loans but completed less than an associate degree were behind on payments. The delinquency rate was 19% for those who had obtained an associate degree, 7% for those with a bachelor's degree, and 6% for those with a graduate degree. Overall, 8% of adults who took out student loans reported they were behind on their payments.
Decline in Delinquencies
The Federal Reserve reports that less than 1% of student loan debt was at least 90 days delinquent or in default in the third quarter of 2023. But this figure likely understates borrowers’ true ability to pay back their loans.
In response to the COVID-19 pandemic, student loan payments and interest were suspended, and collections on defaulted student loans also came to a halt. Those measures have now come to an end. Student loan interest resumed on Sept. 1, 2023, and the first student loan payments since the pandemic began were due on October 1.
Though payments have resumed, delinquency rates are likely to remain unchanged, at least in the short term. The Biden administration instituted a one-year easing-in period starting from Oct. 1, 2023, to help financially vulnerable borrowers. If borrowers miss their monthly payment during this one-year period, they will not be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.
Acting under the Higher Education Relief Opportunities for Students Act of 2003, the Biden administration had sought to provide direct relief to students, canceling up to $20,000 in debt for Pell Grant recipients and $10,000 in debt for other federal student loan borrowers. But the U.S. Supreme Court ruled on June 30, 2023, that the administration lacked the authority to do so.
Two months later, the White House Biden responded by launching an income-driven assistance program, the Saving on a Valuable Education (SAVE) plan. The plan cuts monthly student loan payments for undergraduate borrowers to 5% of discretionary income, changes the discretionary income formula so that an estimated 1 million low-income borrowers will see their monthly payments drop to $0, eliminates the capitalization of unpaid interest (so as long as borrowers keep current with their payments), and allows borrowers with balances of $12,000 or less to receive loan forgiveness after 10 years of payments.
Economic Impact of Debt Cancellation
The sheer size of student debt can be characterized as a weight on the U.S. economy as well as a burden on the millions of individuals who owe it. The federal government holds $1.6 trillion in student loans, compared with an estimated $130 billion held by private lenders.
After the Supreme Court rejected White House efforts to cancel a portion of federal student loan balances, the Biden administration announced the Saving on a Valuable Education (SAVE) plan, an income-driven repayment program that it says will lower monthly payments for 20 million borrowers.
Pros and Cons of Debt Cancellation
Research from the Center for American Progress suggested that wiping out student debt would have minimal effects on inflation while helping workers "buildwealth, and reduce theracial wealth gap, immediately improving financial security and laying the foundation for faster upward economic mobility."
A 2018 study from the Levy Economics Institute at Bard College estimated that outright debt cancellation would boost gross domestic product (GDP) by $86 billion to $108 billion per year.
But detractors warned of the risk of moral hazard caused by implying that the cost of your decisions would be borne by someone else. This would lead to even higher student debt burdens as borrowers assume additional forgiveness would be forthcoming.
The Committee for a Responsible Federal Budget argued that student loan forgiveness would have, at best, provided only a weak stimulus to the economy. The group believed that for every dollar of loan forgiveness, just 2 to 27 cents of economic activity would be generated.
How Much of the U.S. Population Has Student Loan Debt?
The U.S. Department of Education reports that 43.2 million borrowers had outstanding federal student loans as of the fourth quarter of 2023, representing $1.6 trillion in debt. That figure reflects the growing importance of a college degree to getting a well-paying job. It also reflects just how much college costs have increased.
How Can I Get My Student Loans Forgiven?
In addition to state student loan forgiveness programs, there are several ways to qualify for forgiveness from the federal government. Teachers can receive up to $17,500 in debt forgiveness after teaching in low-income schools for five years. A similar debt forgiveness program provides relief for public service employees who work in government, for hospitals, or at approved nonprofits. If you become totally and permanently disabled, you may be eligible for a discharge of the debt. For other borrowers, income-driven repayment programs provide debt forgiveness after 20 to 25 years of making payments. If you haven’t paid off your student loans by then, the balance is wiped clean. Those interested in loan forgiveness programs should visit the Federal Student Aid website or contact their loan service provider.
Is Student Debt Worth It?
Whether or not student debt is worth it depends on a borrower's financial circ*mstances and if they graduate. Ideally, when a borrower takes out loans to pay for college, the degree they earn is able to help put them on the path to a high-paying career. Of course, not everyone is able to finish school or secure work after graduating, leaving them stuck with student debt and nothing to show for it.
The Bottom Line
Most students who attend college are hoping to earn a degree that will dramatically increase their earning power after graduation. But for many adults, much of those earnings will have to go toward paying back student loans. This is a heavy burden to carry, especially before someone has earned their first professional paycheck.
