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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 $38,792 in 2020. Collectively, they owe nearly $1.6 trillion, according to the Federal Reserve Bank of New York.

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 public four-year institution has nearly tripled, and it more than doubled at private 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.

Key Takeaways

  • Soaring college costs and pressure to compete in the job marketplace are big factors for student loan debt.
  • Nearly one-third of American students now need to borrow to pay their way through college.
  • Borrowers who don't complete their degrees are more likely to default.

Overall Average Student Debt

How big a role do student loans play at today's colleges and universities? Here is a snapshot of borrowing in 2020 & 2021.

Student Loans in 2020 & 2021: A Snapshot
$1.57 trillion Amount of student loan debt outstanding in the United States
30% Percentage of college attendees taking on debt, including student loans, to pay for their education
$38,792 Average amount of student loan debt per borrower
5.7% Percentage of student debt that was 90+ days delinquent or in default
Sources: Federal Reserve, Experian

The total amount of outstanding student loans was $1.57 in 2021. Based on the current rate of growth, aggregate student loan debt could reach $2 trillion by 2024 and $3 trillion by 2038, according to Saving for College.

Growth of Student Loan Debt (in Trillions)
2020 $1.57
2019 $1.4
2018 $1.33
2017 $1.28
2016 $1.17
2015 $1.13
2014 $1.06
Source: Experian

Average Loan Balances

Roughly 30% of all Americans who went to college took on some form of debt in order to do so, according to the Federal Reserve. 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 second quarter of 2021, according to the U.S. Department of Education. Adults ages 35 to 49 carried even more debt, with student loan balances totaling $613 billion. People who are 50 to 61, meanwhile, owe about $273.7 billion in student loan debt.

Decline in Delinquencies

Nine percent of adults who took out student loans were behind on their payments, according to the latest figures available from the Federal Reserve, and 5.7% of all student loan debt was at least 90 days delinquent or in default.

However, these numbers actually 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 another extension now moved the deadline to Jan. 31, 2022.

About 27% of people who entered college in the 2003–2004 academic year have since defaulted, notes Judith Scott-Clayton, an associate professor of economics and education at Columbia University and a former Brookings Institution expert, according to data released by the U.S. Department of Education in Oct. 2017. She concludes that 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.

People who get advanced degrees tend to accumulate more debt but are also likely to make payments on their student loans on time.

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.

The American Rescue Plan passed by Congress and signed by President Biden in March 2021 includes a provision that student loan forgiveness issued between Jan. 1, 2021, and Dec. 31, 2025, will not be taxable to the recipient.

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, according to reporting by CNBC. 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 provides, at best, a weak stimulus to the economy, because the savings are realized in small amounts over a long period of time, depending on how much a borrower pays back monthly with full or partial forgiveness.

Average Student Loan Debt FAQs

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

What Percentage of the U.S. Population Has Student Loan Debt?

As of 2020, about 30% of all American adults were saddled with student debt, according to the Fed. That figure reflects the growing importance of a college degree to getting a well-paying job. It also reflects just how much college costs have increased.

How Much Is the Average Student Loan Debt in the U.K.?

Students who graduated from universities in England in 2020 owed an average of £40,280 in student loan debt, compared with just under £25,000 for graduates of Welsh universities, £23,520 for graduates in Northern Ireland, and £13,890 for graduates of Scottish universities. Those figures are vastly higher than they were in the year 2000 when indebtedness for graduates in all three countries was under £3,000.

How Do You Get Your Student Loans Forgiven?

The U.S. government will currently forgive, cancel, or discharge some or all of an individual's student loan debt only under a number of specific circumstances. Teachers in low-income schools and public service employees may be eligible for forgiveness of a portion of their debt. People who are disabled may be eligible for discharge of the debt. In August, the U.S. Department of Education said it would cancel $5.8 billion in student loans for borrowers who qualify as having a total and permanent disability.

The Federal Student Aid office indicates that those who think they may qualify for loan forgiveness should contact the student loan servicer for their loans. That is the company that handles the loan payments.

As noted above, a federal emergency relief measure suspended student loan repayments from March 2020, and the deadline has now been moved to Jan. 31, 2022. Collections on payments that are in default also were halted. This is a suspension of repayment, not a cancellation or even a reduction of the debt.

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.