Have you ever wondered how many people have student loan debt?
As of last year, there’s a high number of American students going into debt to finish college.
In fact, student loans have become the second-largest household debt next to mortgages, showing that one in every eight Americans has to borrow money for education.
It only proves that getting a college degree today requires more financial sacrifice than the previous years did.
Even saving up for a college education is not enough.
This results in even more increasing student debt, as more families rely on loans to sustain their education.
Average Loan Balances
Let’s have a quick look at the borrowing trend in 2020.
The current unpaid student loan debt in the United States amounts to $1.57 trillion.
One of the most prominent factors for the increase is the high cost of a college education.
Last year, 54% of college students had to borrow money to compensate for their educational expenses.
Here’s what we learned from the office of Federal Student Aid of the Department of Education.
Young adults between ages 25 to 34 carry around $500 billion of federal student loan debt as of the fourth quarter of 2020.
Adults from 35 to 49 years of age account for $602 billion in student loan balances.
Whereas those between 50 to 61 years old still owe $262 billion.
At this time, at least two out of 10 student loan borrowers are late on their payments.
Overall, 6.5% of the total student loan debt is 90 days delinquent or worse on default.
These numbers had lowered since the pandemic began when emergency relief measures were put in place.
The government stopped collecting payments for student loans in default and temporarily suspended loan repayments.
As observed by economists, people with advanced degrees tend to amass more debt but make student loan payments on time.
Most delinquent borrowers come from those who did not finish their associate’s or bachelor’s degrees.
Debt Cancellation Impact on the Economy
The U.S. government finances almost 92% of student loan debt, making it a burden for the borrower and the US economy.
Some politicians suggest total cancellation or deducting $50,000 from each borrower’s federal student loan debt.
Analysts believe that canceling the student loan debt is practical and can help the economy, which will benefit low-income households and minorities.
However, others think it may add to more student debt issues if borrowers expect loan forgiveness to continue.
Recently, President Biden dismissed the proposal of wiping out $50,000 from each borrower’s student loan debt.
However, he said he is willing to support up to $10,000 in loan deduction instead.
Also, he plans to cancel $10,000 from student loan debt every year for five years for borrowers working in public service.
Canceling $10,000 per student loan will significantly help the unemployed Americans during this time of the pandemic.
How Many People Have Student Loan Debt?
Student loan debt is not exclusive to federal loans; it also includes private student loans and those made by parents.
Federal Student Loan Debt
As of 2019, 14% of American adults are burdened with student loan debt.
At present, 65% of the college student population has borrowed money for their education.
Each student has an average loan of $39, 351 owed to the US government through the Department of Education.
Higher education costs continue to rise year after year, forcing students and, sometimes, their parents to rely on student loans.
The majority of the borrowers who owe the government more than $100,000 came from graduate school.
They make 25% of the overall number of student loan borrowers, while 75% are enrolled in a two-year or four-year course.
Alternatively, 18% of these borrowers have student loan debt of less than $5,000.
In addition, 30% of bachelor’s degree holders graduate free of debt.
Another 33% of these borrowers graduate with loans lower than $20,000.
Again, this information is specific to federal student loan debt.
Private Student Loan Debt
Loans from this category are made from various private lending companies offering different terms and benefits.
Private student loan debts account for 7.87% of the overall outstanding student loans, which amount to $131.81 billion.
Parent PLUS Loan Debt
A parent PLUS loan is a federal student loan specific to parents who want to assist their kids’ financial needs for their education.
This loan type showed a noticeable increase of 42% from 2007 to 2008 and 2017 to 2018.
To date, the total parent PLUS debt amounts to $12.8 billion, with each borrower getting an average loan of $16,452.
What Is Public Service Loan Forgiveness?
The loan forgiveness program clears the borrowers from their obligation to pay off their federal student loans, either whole or in part.
It’s a program designed for those working in public service, whether with non-profit organizations or the government.
The US government can cancel, discharge, or forgive some or all of the borrower’s student loan debt if eligible.
There are two significant ways to earn loan forgiveness: being employed in public service and paying your debt via an income-contingent repayment plan for an extended period.
Those working in the military, the medical field, or specific volunteer work may be eligible for this program.
Some eligible positions may include nurses, police, firefighters, government employees, and social workers.
The government may also forgive your student debt after making 120 eligible payments while working for a qualified employer for 10 years.
With loan discharge, the borrower’s obligation to pay for the debt immediately stops.
The person may also receive a refund from previous payments made.
Generally, federal student loans may be discharged because of the following situations:
- Death or permanent disability of the borrower
- School closure during the academic season
- The school falsified loan requirements
- Use of fraudulent identity to get the loan
- The school’s failure to refund the lender of the required loans
A student dropping out or his inability to secure a job after graduation is not considered an eligibility factor.
Student Loan Repayment Status
Due to the pandemic, the US Department of Education placed emergency relief flexibilities for all borrowers, students, and parents.
Federal Student Loans
Borrowers who cannot make payments can delay them using deferment or forbearance.
However, interest usually increases during this time.
For subsidized loans, borrowers are not obliged to pay for the accumulated interest during deferment.
The number of borrowers in repayment is 27.1 million, while those in deferment are at 3.1 million.
Shockingly, the number of borrowers who cannot pay during forbearance skyrocketed to 23 million because of the government’s loan relief due to the pandemic.
Apart from this, there’s a temporary suspension of default and delinquency data placed by the Office of Federal Student Aid until March 31, 2021.
Private Student Loans
Private student loan borrowers can also use deferment or forbearance to delay their payments.
However, interest will always accumulate whether or not they make payments.
There is a 20.39% unpaid loan balance in deferment, while there is a 5.16% outstanding balance in forbearance.
Private loans in repayment delayed for more than 90 days after their due date are at 1.10%.
Impact of Student Debt on College Students
The student debt dilemma has forced borrowers to postpone conventional milestones of being an adult to keep their focus on repayments.
For instance, more than a fifth of these borrowers decided to put off getting married.
Also, 26% postponed having kids, while 36% bided their time in buying a house.
Most of these students are highly indebted even before they graduate and yet financially inexperienced.
Here are some negative impacts of student debt on these young adults:
Forego Graduate School
Enrolling in a graduate school is expensive, but it can make a lot of difference to how much starting salary you can receive.
Those who want to go to graduate schools must think about the educational costs versus how much you can earn after you graduate.
Today, most graduates leave school with a school debt burden that they need to repay a few months after graduation.
Going to graduate school in the hopes of earning more would also mean adding more debt to the current one.
Cannot Buy a House
Paying off a student loan debt hinders your chances of buying a house.
Most of these young adults opt to rent instead because they can’t afford to buy a home.
They may have the money for the monthly payments for a new home, but they lack the savings to make a downpayment.
Most of their earnings typically go to paying off their student debt.
Forced To Live at Home
Some young adults choose to rent because they don’t have enough to buy a house due to student debt repayments.
Unfortunately for others, what’s left of their earnings goes to student debt repayments that they cannot afford to rent a place.
Their only option is to live at home with their parents because they cannot afford to pay for the student debt and the rent at the same time.
Low Net Worth
If you have large student debt, chances are, you also have decreased net worth that affects your overall lifestyle.
Dreams Are Put On Hold
Student debt can influence a person’s standard of living and financial independence.
It can also dictate which dreams he can pursue and put on the back burner for the meantime.
Some individuals tend to choose a high-paying job even if it’s not what they want because they need the monetary benefits to pay for their student debt.
Intentionally, you will forego dreams in place of practical decisions to help you with your financial obligations.
Low Credit Score
A student loan is similar to other debt.
Failure to make payments on time affects your overall credit standing negatively.
Lending companies are less likely to offer you anything if you have low credit scores, making it hard to purchase a house or a car.
Lenders, insurance companies, and other financial institutions will check and use your credit scores when dealing with them.
Student Debt Does Not Go Away
Student debt is different from other loans that you can stop if you can’t make timely payments.
What do we mean by that?
For example, you can talk to the dealer if you think you cannot keep up with your payments and decide to return the car instead.
You can use the same principle with a house mortgage but not with student loan debt.
From the time you get approved, there is no turning back.
The only option you have is through student loan forgiveness, which is rare and difficult to come by.
Applying for a job is quite challenging.
Most companies conduct background checks, including an applicant’s credit history.
According to a CNN report, 34% of the companies do credit checks on some of their applicants, while 14% perform it on all job seekers.
If you are delinquent in making your student loan payments, it might show up in your background check and affect your job application.
Seizure of Funds
If your federal loan is past its due for more than 270 days, there is a chance that you will not get a tax refund for some time.
The federal government can seize the money if you default on your student loan debt.
They can even get ahold of your other government payments.
Higher Default Rate
Failing to make your loan payments on time puts you in default, and the debt goes into delinquent status after some time.
You stay in default until you update your account by paying off the debt.
Knowing how many people have student loan debt gives us an idea of this crisis and how it affects the nation’s economy.
You start to wonder where all this money comes from.
Most of these young adults go to college in the hopes of earning a degree.
In turn, they can boost their financial status, especially now that a lot of people lost their jobs due to the pandemic.
While in school, they try to look for all kinds of resources to lower their expenses until they graduate.
Basically, they work and day to strive and make ends meet.
Then, after graduation, most adults pay a big chunk of their earnings to their student loan repayments.
They cannot enjoy the fruits of their labor until after they paid the debt in full.