Student Loan Debt: 2021 Statistics and Outlook

Nearly one-third of all American students now have to go into debt to get through college, and the average student loan debt reached a record high of $40,904 in 2021. Collectively, they owe about $1.75 trillion.

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 is more than three times the cost to attend a public four-year institution, and it more than doubled at public four-year schools, according to the College Board.

For many Americans, footing the bill through savings and investments simply isn’t sustainable. The upshot is that more students and families are relying on loans to pursue higher education, and the average 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 $1.75 trillion in 2021, growing from $1.7 trillion in 2020 and $1.57 trillion in 2019.

Average Loan Balances

Roughly 43% 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 (95% of those who hold education debt took out student loans). However, 26% of people used other forms of borrowing, including credit cards (21%), home equity lines of credit (4%), and other types of credit (12%).

Most of this debt is carried by younger adults. Borrowers between the ages of 25 and 34 had over $500 billion in federal student loan debt as of the fourth quarter of 2021. Adults ages 35 to 49 carried even more debt, with student loan balances totaling $622 billion. People who are 50 to 61, meanwhile, owe about $281 billion in student loan debt.

Decline in Delinquencies

Eighteen percent of adults who took out student loans were behind on their payments, according to the latest figures available from the Federal Reserve, and about 5% of all student loan debt was at least 90 days delinquent or in default.

However, these numbers understate the problem, thanks to emergency relief measures regarding student loan repayments that were put into effect in March 2020. Those measures halted collections on defaulted student loans and suspended loan repayments. An executive order signed by President Biden on his first day of office extended the relief measures, and the most recent extension has moved the deadline through Aug. 31, 2022.

About 27% of people who entered college in the 2003–2004 academic year have since defaulted notes. If that growth continues at its current pace, roughly 38% of borrowers in that age bracket will default at some point by the year 2023.

Borrowers who never completed a degree tend to have a harder time paying off their loans. About 31% of people who took out student loans but never completed an associate or bachelor's degree are behind on their payments. 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 with less than $15,000 of outstanding debt, 21% are delinquent. However, only 17% of adults with $15,000 or more in loans are behind on payments.

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.

That fact has made it a political issue. During the 2020 presidential election, some Democratic candidates—among them Sen. Elizabeth Warren (D-Mass.) and then-Senate Minority Leader Chuck Schumer (D-N.Y.)—suggested canceling some or all student debt. They said it could be done by a president's executive order rather than through legislation. In 2021, Sen. Warren continued to call on the administration to cancel up to $50,000 in federal student loan debt for each borrower.

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 ongoing.

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.

Here are some answers to commonly asked questions about student loan debt in the U.S. and the U.K.

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.