As any recent college student—or parent of a student—knows, obtaining a degree requires a much bigger financial sacrifice today than it did just a generation or two ago. Over the past three decades, the average cost to attend a public four-year institution has more than tripled, and 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 tenable. The upshot: More students and families are relying on loans to pursue higher education.

Key Takeaways

  • Outstanding student loan debt reached an all-time high of $1.41 trillion in 2019.
  • Soaring college costs are a big factor in student loan debt, with out-of-state tuition and fees averaging $26,290 per year for a four-year public university and $35,830 for a private college.
  • The average student loan balance per borrower hit a record high in 2018: $35,359.
  • Borrowers who don't complete their degree have a harder time paying off their loans.

Overall Debt

How big a role do student loans play at today’s colleges and universities? Here is a snapshot of borrowing in 2019:

Student Loans in 2019: A Snapshot
$1.41 trillion Amount of student loan debt outstanding in the United States
54% Percent of college attendees taking on debt, including student loans, to pay for their education
$35,359 Average amount of student loan debt per borrower
14.4% Percent of adults with a student loan
10.8% Amount of student debt that's at least 90 days past due or in default

Source: Experian, Federal Reserve

The total amount of outstanding student loans reached an all-time high in 2019, at $1.41 trillion, according to the credit reporting agency Experian. That’s a 6% increase from 2018 and a whopping 33% spike since 2014, when total debt was $1.06 trillion. Based on the current rate of growth, aggregate student loan debt could reach $2 trillion by 2024, according to the website Savingforcollege.com.

The soaring cost of college is certainly a big factor in that growing debt load. The average out-of-state tuition and fees at a four-year public university are now $26,290 per year, according to Experian. Private colleges are even pricier, with an average published cost of $35,830 for tuition and fees.

Growth of Student Loan Debt (in trillions)
2019 $1.41
2018 $1.33
2017 $1.28
2016 $1.17
2015 $1.13
2014 $1.06

Source: Experian

Average Loan Balances

Roughly 43% of Americans who went to college took on some form of debt in order to do so, according to the Federal Reserve. But that number is even higher for today’s students, 54% of whom need to borrow to cover their educational costs.

Student loans are by far the most common borrowing options (93% of those who hold education debt have student loans). However, 31% of people used other forms of borrowing, including credit cards (24%), home equity lines of credit (7%) and other types of credit (12%).

At $35,359, the average student loan balance per borrower also represented a record high in 2018. That’s up slightly from $34,144 in 2017, according to Experian data.

Not surprisingly, most of this debt is carried by younger adults. Borrowers between the ages of 25 and 34 carried roughly $498 billion in federal student loan debt as of the second quarter of 2019, according to the U.S. Department of Education. Adults ages 35-49 carried even more debt, with student loan balances totaling $558 billion. People who are 50-61, meanwhile, owe about $230 billion in student loans.

Uptick in Delinquencies

In 2018, the last year for which the Fed has available data, approximately 2 in 10 adults who took out student loans were behind on their payments. And a significant portion are significantly in arrears. According to the Federal Reserve Bank of New York, 10.8% of total student loan debt was at least 90 days delinquent or in default as of the second quarter of 2019.

Those numbers may actually understate the problem because nearly half of student loans are in deferment, forbearance, or grace periods. As a result, they’re not included in the delinquency figures. About 27% of people who entered college in the 2003-2004 academic year have since defaulted, notes Judith Scott-Clayton of the Brookings Institution, using data from researcher Ben Miller. If that growth continues at the current pace, she concludes that roughly 38% of borrowers in that age bracket will default at some point by the year 2023.

People who get more advanced degrees tend to accumulate more debt, but they 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. Thirty-seven percent of people who took out student loans but never completed an associate or bachelor's degree are behind on their payments. But that number drops to 21% for adults with an associate degree and 10% for those with a bachelor's degree.

While 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 $10,000 of outstanding debt, 18% are delinquent. It goes up to 22% for those with debt loads between $10,000 and $24,999. However, only 16% of adults with $100,000 or more in loans are behind on payments.

Economic Impact of Debt Cancellation

Moody's Investor Service predicts wiping out student debt, as some 2020 presidential candidates have suggested, would yield a stimulus to economic activity similar to tax cuts in the near term. Over the longer term, while it could increase home ownership and the number of small businesses, analysts warn of the risk of moral hazard and accumulation of even higher student debt burdens.

"Universal student debt cancellation would only marginally increase the U.S. government's debt burden, but it would also lead to about 0.4% of GDP in annual forfeited revenue as the government foregoes debt service collection on forgiven loans," analysts said in a November note. Last year, the U.S. Department of Education collected $85 billion in principal, interest and fees on federal loans.

If student debt is canceled and no measures to offset the loss in revenue are taken, Moody’s says that the fiscal deficit would widen to 6.7% of GDP by 2029, up from its current forecast of 6.3% of GDP.

The Bottom Line

Students who attend college are hoping to earn a degree that will dramatically increase their earning power after graduation. But for many adults, much of those earnings will have to go toward paying back student loans. Currently, about 54% of students need to borrow in order to pay for tuition and fees. And among those who do, the average balance is a hefty $35,359. That’s a heavy debt burden to carry, even before someone has earned their first professional paycheck.