Student Loan Debt: 2022 Statistics and Outlook

As any recent college student (or parent of a student) knows, obtaining a degree requires a much bigger financial sacrifice today than it did a generation or two ago. Over the past three decades, the average cost to attend a private four-year institution climbed to more than three times the cost to attend a public four-year institution, according to the College Board.

For many Americans, footing the bill through savings and investments simply isn’t possible. The upshot is that more students and families are relying on loans to pursue higher education, and the total student loan debt keeps growing.

Overall Average Student Debt

How big a role do student loans play in today's colleges and universities? Here is a snapshot of borrowing.

The total amount of outstanding student loans was $1.76 trillion in Q4 2022 compared to $1.73 trillion one year prior.

Average Loan Balances

Thirty percent of all Americans who went to college took on some form of debt to do so. Student loans were by far the most common borrowing options (96% of those who hold education debt took out student loans). However, 24% of people used other forms of borrowing, including credit cards (19%), home equity lines of credit (4%), and other types of credit (11%).

Most of this debt is carried by younger adults. Borrowers between the ages of 25 and 34 had nearly $500 billion in federal student loan debt as of the fourth quarter of 2022. Adults aged 35 to 49 carried even more debt, with student loan balances totaling $634 billion. People ages 50 to 61, meanwhile, owe about $293 billion in student loan debt.

Decline in Delinquencies

Twelve percent of adults who took out student loans were behind on their payments, according to the latest figures available from the Federal Reserve, and less than 1% of all student loan debt was at least 90 days delinquent or in default in Q4 2022.

However, these numbers understate the problem due to emergency relief measures regarding student loan repayments that were put into effect in March 2020 and have since been repeatedly extended. Those measures suspended loan repayments, froze the interest amounts owed, and banned collections on defaulted student loans.

The latest student loan relief measure, announced on Nov. 22, 2022, extends the policy until one of the following two dates:

• 60 days after the Supreme Court rules on lower-court orders that have prevented the federal government from implementing a separate program to forgive some student debt owed by millions of Americans, or,
• 60 days after June 30, 2023, if the Court does not resolve the issue by that date.
  

Borrowers who never complete a degree are more likely to have a harder time paying off their loans. About 23% of people who took out student loans but never completed an associate's or bachelor's degree were behind on their payments in 2021.

Though people with more advanced degrees tend to take on more debt, they're more likely to make their student loan payments on time. Of the former college students who completed an associate degree in 2021, 18% were delinquent. However, just 6% and 5% of adults who completed a bachelor's degree or graduate degree, respectively, were behind on payments during this same year.

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. About 92% of student loan debt is backed by the U.S. government.

Pros and Cons of Debt Cancellation

Moody's Investor Service predicts wiping out student debt would yield a stimulus to economic activity that is comparable to tax cuts in the near term. Over the longer term, it could increase homeownership and boost the creation of small businesses. Outright debt cancellation would boost real gross domestic product (GDP) by $86 billion to $108 billion per year, according to one study from Bard College's Levy Economics Institute.

However, analysts warn of the risk of moral hazard caused by implying that the cost of your decisions will be borne by someone else. This could lead to even higher student debt burdens, as borrowers assume forgiveness will be forthcoming.

Another argument suggests that forgiving student loan balances will provide, at best, a weak stimulus to the economy because the savings are realized in small amounts over a long period, depending on how much a borrower pays back monthly with full or partial forgiveness.

The Bottom Line

Most students who attend college are hoping to earn a degree that will dramatically increase their earning power after graduation. Still, 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.