Who is most affected by student loans?

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The cost of college has steadily increased over the last 30 years. In that timeframe, tuition costs at public four-year colleges grew from $4,160 to $10,740 and from $19,360 to $38,070 at private nonprofit institutions (adjusted for inflation). As costs have risen, so has the need for student loans and other forms of financial aid.

Today, more than half of students leave school with debt. Here’s a snapshot of how much the average student borrows, what types of loans are most common and how those loans are repaid.

• $1.75 trillion in total student loan debt (including federal and private loans)
• $28,950 owed per borrower on average
• About 92% of all student debt are federal student loans; the remaining amount is private student loans
• 55% of students from public four-year institutions had student loans
• 57% of students from private nonprofit four-year institutions took on education debt

Sources: Federal Reserve, The Institute for College Access and Success, College Board, MeasureOne

States with Highest and Lowest Average Student Debt

Source: The Institute for College Access and Success

Federal Student Loan Portfolio

Federal student loans make up the vast majority of American education debt—about 92% of all outstanding student loans is federal debt. The federal student loan portfolio currently totals more than $1.6 trillion, owed by about 43 million borrowers. Here’s how that debt breaks down by loan type.

Source: Federal Student Aid

Federal Student Loans by Age

Unsurprisingly, younger people hold the majority of student loan debt. Borrowers between the ages of 25 and 34 carry about $500 billion in federal student loans—the majority of people in this age group owe between $10,000 and $40,000.

However, people carry their education debt well into middle-age and beyond. Borrowers ages 35 to 49 owe more than $620 billion in student loans. This cohort has the highest number of borrowers who owe more than $100,000 in loans.

Even retirees feel the pressure from student loans; there are 2.4 million borrowers aged 62 or older that owe $98 billion in student loans.

Source: Federal Student Aid

Private Student Loan Portfolio

• $131 billion in outstanding private student loan debt
• Only 7.6% of all education debt comes from private student loans
• 89% of private loans are owed for undergraduate degrees; 11% are owed for graduate school
• 92% of undergraduate private loans are co-signed, 66% of graduate private loans required a co-signer
• Essentially all private loans (99.9%) require school certification, a process where the school confirms the borrower’s student status and cost of attendance

Source: MeasureOne

Student Loan Repayment Statistics

Since the start of the Covid-19 pandemic, student loan payments have been flipped on their head. Federal student loan payments have been paused nationwide since March 2020, and the majority of federal loans are currently in forbearance.

At the beginning of 2020, just 2.7 million borrowers had their federal loans in forbearance. That number had shot up to 24 million borrowers by the end of 2021. However, this reprieve is set to expire in May 2022, when federal student loan payments are expected to resume.

Here are the current repayment statuses of the federal Direct Loan program.

Private student loans, on the other hand, received no widespread forbearance options during the pandemic. The majority of private student debt is actively in repayment. In the third quarter of 2021, 74% of private loans were in repayment, 17.5% were deferred, 6% were in a grace period and 2.4% were in forbearance.

Sources: Federal Student Aid, MeasureOne

Check Out: Best Private Student Loans

Repayment Programs

The federal student loan system has a multitude of repayment options for borrowers to choose from. Some plans require borrowers to qualify based on their income and family size, but other plans are available to anyone.

Here’s how the federal loan portfolio is distributed amongst the most popular repayment plans.

Private student loans don’t have standardized repayment plans—your options are determined by your specific lender. However, many private lenders offer at least a few plans to choose from. It’s common to have the choice to make interest-only payments in school, make small flat payments while in school or defer all payments until after graduation.

After graduation, most private lenders will require you to make full payments that are evenly distributed over your repayment term.

Sources: Federal Student Aid

Delinquencies and Defaults

About 5% of student debt was at least 90 days delinquent or in default in the fourth quarter of 2021. However, that number is artificially low—federal loans that are currently in forbearance due to Covid-19 are reported as current by the Department of Education. Once regular payments resume, a portion of the paused loans will be reported as defaulted.

In the table below, the historical data illustrates the number of borrowers that are delinquent or in default on their federal Direct loans. Direct loans are considered to be in default after 270 days of nonpayment. Reporting between 2020-2021 is not complete due to the Covid-19 forbearance.

When you look at private student loans, the rates of delinquency and default have been steadily decreasing over the past decade. Here are the historical delinquency rates for private student loans, listed as a percentage of loans that were in repayment.

﹡2021 data is as of the third quarter
Sources: Federal Reserve Bank of New York, Federal Student Aid, MeasureOne

Check Out: Best Student Loan Refinance Lenders

Student Loan Forgiveness

As of September 2021, 10,776 borrowers have successfully had their federal loans forgiven through the Public Service Loan Forgiveness (PSLF) program. More than $1 billion has been forgiven, with the average applicant discharging about $95,000 in debt. An additional 1.3 million borrowers may be eligible for PSLF in the future, representing about $132 billion in debt.