Are you crushing under the weight of student loan debt? You’re not alone. The staggering student loan debt crisis in the United States is impacting millions of Americans, with borrowers owing over $1.75 trillion. Let’s take a look at the latest data to see what’s going on.
Student loan debt in the United States is staggering, with a total of nearly $1.75 trillion owed by around 48 million Americans – making it more than total U.S. auto loan debt. Of these borrowers, 45.4 million have federal student loan debt. As of the first quarter of 2022, 4.7% of student loans were delinquent for 90 days or more. Before the repayment moratorium was implemented by the White House, the average monthly student loan payment was $300.
(Data via the Federal Reserve)
The federal student loan program consists of several types of loans, including Direct Loans, FFEL Loans, and Perkins Loans. Let’s dig into what each type of loan does and how much is owed.
Direct Loans are the most popular option because they offer the lowest interest rates and most flexible repayment plans. They are awarded to students by the federal government, and do not require a credit check. Direct Loans are the most common type of loan, with 37.2 million borrowers owning a total of $1.38 trillion.
FFEL Loans (Federal Family Education Loans) are offered by private lenders but are guaranteed by the federal government, making them more expensive and less flexible. FFEL Loans are less common, with 9.9 million borrowers owing $225.7 billion.
Perkins Loans are awarded to students with exceptional financial need, and have favorable interest rates and repayment terms. Perkins Loans have the smallest volume, with only 1.5 million borrowers owing $4.2 billion.
Understanding the breakdown of federal student loans helps borrowers determine their eligibility for various repayment plans and forgiveness programs. Direct Loans, for example, are eligible for Public Service Loan Forgiveness (PSLF) and income-driven repayment plans, while FFEL Loans are not.
Federal student loans come in different types, and each type has its own unique features. Here is a breakdown of the most common types of loans, including Stafford subsidized, Stafford unsubsidized, Stafford combined, Grad PLUS, Parent PLUS, Perkins, and consolidation loans.
While the burden of student loan debt can seem overwhelming, understanding the different types of federal loans and their repayment options can be crucial when managing student loan debt. It’s important to note that private loans, which are not included in these statistics, often have different terms and repayment options, and may not offer loan forgiveness or income-driven repayment plans.
When we look at the data from Federal Student Aid in December 2021, we can see how student loan debt is distributed by loan status. So, let’s take a closer look at the data.
Student loans in default or delinquency
Unfortunately, there are also loans that have gone into default, which means they are severely delinquent. Defaulted student loans total $110.5 billion, affecting 5.0 million borrowers. However, there is some good news too – loans that are in the grace period (meaning they don’t yet need to be paid back) total $23.6 billion, with 1.2 million borrowers. So, that’s how student loan debt is distributed by loan status according to the latest data from Federal Student Aid.
The most popular federal student loan repayment plan is the level repayment plan. This plan allows borrowers to pay a fixed amount each month for 10 years or less. Other popular plans include the graduated repayment plan, which starts with lower payments that gradually increase over time, and income-driven repayment (IDR) plans, which base payments on income and family size.
The most popular federal student loan repayment plans are the level repayment plan, the graduated repayment plan, and income-driven repayment (IDR) plans. For example, borrowers with a stable income and want to pay off their loans quickly may prefer the level repayment plan. Borrowers who are just starting out in their careers and have a lower income may prefer the graduated repayment plan. Borrowers with a lower income or have difficulty making their regular loan payments may prefer an IDR plan. Borrowers should choose the plan that best meets their individual needs.
(Data via Federal Student Aid)
PSLF Statistics: How Many Borrowers Have Received Forgiveness?
When it comes to public service loan forgiveness (PSLF), it’s important to know exactly how many borrowers have benefited from the program thus far. Based on the latest available data from May 2022, a total of 1,338,830 borrowers have been enrolled in the PSLF program. Out of those borrowers, 1,046,449 have submitted forgiveness applications, and a total of 12,523 borrowers have been granted PSLF.
It’s also worth noting that the average balance forgiven under PSLF stands at $97,220. Keep in mind, however, that borrowers are self-identified based on certification form submissions, and this information is sourced from Federal Student Aid data.
Lastly, private student loan debt is a significant concern, with Americans owing over $136 billion to private lenders. During the 2020-2021 academic year, private student loan debt volume reached an estimated $12 billion. It’s worth noting that 90% of undergraduate and 63% of graduate private loans were co-signed by someone else during that academic year.
Surprisingly, more than half of undergraduates (53%) do not fully utilize federal student loans and resort to private loans before exhausting their available federal options. In 2019, 16% of student loans were private, and the average interest rate for cosigned private loans was 10.20%. These statistics clearly demonstrate that the cost of higher education can impose a considerable burden on a significant portion of the American population.
It is possible that private student loan debt could become the new normal. The cost of college is likely to continue to increase in the coming years, and the federal government may not be able to keep up with demand for federal student loans. This could force more students to turn to private lenders for financing, and put a greater reliance on scholarships.
(Data via the Institute for College Access and Success CollegeBoard and MeasureOne)