Student Loans

The Numbers Behind the Student Loan Crisis

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 4 minute read

Mark Twain famously said there were three kinds of lies: lies, damn lies, and statistics.  The numbers behind the American student loan crisis, however, certainly do not lie about its dire nature.  For the first time in history, student loan debt has grown larger than total credit card debt (itself a serious issue for millions of Americans, and not mutually exclusive to loan debt) and stands at a total of one and a half trillion dollars, give or take a few hundred billion.  Putting these numbers into context can boggle the imagination; as just one comparison, this amount of money could pay off every debt racked up in the budgets of all 50 states.  Put another way, if you could stack this debt in $1 bills, you’d reach halfway to the moon.

44 million Americans hold at least one student loan, more than the entire population of California.  With an average amount of just under $45,000 in loan debt per person, these obligations nearly amount the annual median household income (and comes in several thousand dollars higher than the median household income of poorer states like Mississippi).  Only mortgage debts are a higher financial obligation.

It’s tempting to stereotype Americans with student loan debt as millennials who took out hundreds of thousands of dollars in loans, especially when half of all student loan holders are under the age of 25.  However, excessive borrowing is not unique to the younger generation, even if they’ve been borrowing more than their parents and grandparents.  More Americans under 30 have student loan debt than any other age bracket, but nearly 3 million Americans over 60 carry student loan debt, a number that’s rising fast as more middle-aged and senior Americans look to extend the duration of their careers by going back to school.  Although the total student debt owed by those under 25 has doubled in the past decade, it has increased tenfold in the highest age bracket over that same period of time.

Extreme borrowing is not rare but is also not the majority.  Only half a million Americans have loan debt greater than $200,000 and only two million have loan debt greater than $100,000.  Nearly ten million Americans, by contrast, have loan debt of less than five thousand dollars and half of all Americans with student loan debt owe less than $25,000.

Student loans may not seem to be discriminatory, but a closer look at the number indicates that the debt load is not carried evenly.  The trend of universities admitting more and more women and fewer and fewer men ((60% of all graduates at four-year universities are now women) has resulted in women carrying larger loan obligations than men overall.  Not only are women racking up more student loan debt, accumulating about $1500 more in debt than their male counterparts, but they’re also repaying it slower: women who graduated a decade ago have paid off just 33% of their loans, compared to 44% for men.  Women take out more debt than men for several reasons: first and foremost, they’re more likely to spend all four years at university and graduate than men, who drop out earlier in larger numbers.  However, men are also more likely to drop out before they incur high student loans (for example, by going to community college before transferring to a four-year school).  Other factors that leave women on the hook for more loan debt is their higher enrollment numbers in for-profit schools and the greater likelihood that women will work and take care of children during their time as students.

Nor is debt distribution even across all ethnicities: Asian-American students take out the least amount of loans, about 70% of their first-year income, while African-American students take out an average of 101% of their first-year income.  Interestingly, Hispanics are the only ethnic demographic where men borrow about as much as women.

Where you live can matter just as much as who you are when it comes to student loans.  New Hampshire has the highest student loan debt load of any state in the nation, with each graduate holding an average of $25,000 worth of debt, due to its close proximity to high-profile and Ivy League schools in New England.  By contrast, Utah students graduate with an average of just $7,500 in debt since the state legislature caps the costs of tuition; Utah students also have the fewest number of students take out loans in the nation (just 41%).  What’s more, Utah further bucks the broader national trend because it is one of the only states in the union where the total amount of student debt is falling rather than rising.

With steep debt comes the unfortunate stories about Americans unable to pay back their obligations.  Over one in ten have loans that are either delinquent or in outright default, resulting in thirty billion dollars of total loans that are 90 days overdue, and another thirty billion that have been sent to collections agencies.

Graduate student debt looks somewhat different from total debt averages.  40% of all student loan debt is graduate debt, but unlike undergraduate debt, the largest obligations from graduate students come from science degrees, followed by education and business administration.  While graduate programs in medicine cost more than any other post-secondary education, they account for only 5% of total graduate student loan debt overall.

While federal student loans outnumber private student loans several times over, over one million Americans have loans from private lenders, and private student loan debt stands at over seven billion dollars.  Fewer students are turning to private loans, furthermore, with the total number of private student loans dropping by over 50% in the past decade at the same time that overall student debt has risen by 50%.

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