What if I told you that a single policy change could wipe out student debt for 29% of borrowers? That’s millions of Americans that we’re talking about! How is this even possible, and who benefits the most? Join us as we unravel the Student Loan Forgiveness Statistics and what they mean for the future of education finance in the US.
The student loan debt balance in the U.S. totals more than $1.77 trillion
As of the first quarter of 2023, student loan debt in the U.S. stands at a total of over $1.77 trillion. This number means a 66% increase over the past decade, according to data from the Federal Reserve.
Data shared by the Federal Student Aid shows that out of the more than $1.77 trillion of debt, more than 92% is federal student loans and the remaining amount is owed on private student loans, meaning that $1.6 trillion out of $1.77 trillion are spread among federal student loans.
But what does it mean? To better understand this stat, we need to know the differences between federal student loans and private student loans. You may like to keep this in mind for the rest of the article:
Federal student loans are government-backed loans with fixed, generally lower interest rates, and they offer flexible repayment plans, forgiveness options, and limited credit checks. They have set borrowing limits, and eligibility is often based on financial need.
In contrast, private student loans, offered by private lenders, have variable interest rates depending on creditworthiness, higher borrowing limits, and fewer borrower protections. Repayment terms and options are determined by the lender, and forgiveness programs are rare. Private loans usually require a credit check, while federal loans often do not, except for PLUS loans. Overall, federal loans are more borrower-friendly, providing a safety net with various repayment options and potential forgiveness, while private loans offer flexibility but come with higher risks and fewer benefits.
Now that we understand this critical difference, a whooping 92% of debt corresponding to federal student loans shows the widespread reliance on government-backed financial assistance for education.
US student debt has nearly tripled in the past 15 years
According to data shared by the Federal Reserve, the total student debt in the US went from over $619 billion in Q1 of 2008 to more than $1.77 trillion in Q1 of 2023. This can relate to the fact that the cost of college has more than doubled over the past four decades.
More than 40.4 million student loan borrowers dropped out without completing a degree
According to the National Student Clearinghouse Research Center, by 2021, 40.4 million student loan borrowers had left school before even graduating, meaning that they didn’t get to enjoy the higher earnings that a college education can bring while facing huge amounts of money in debt for the studies they didn’t complete.
Biden’s Student Loan Forgiveness Plan was expected to cost around $400 billion
Biden’s plan, which failed to pass and was blocked by the Supreme Court in September 2023, had around 40 million people who successfully applied and was waiting to have up to $10,000 of federal student loan debt wiped out. The forgiveness program was intended for all federal student loan borrowers making less than $125,000 per year, or couples making less than a combined $250,000.
A forgiveness of $10,000 would completely free at least 12.8 million people
According to the Federal Student Aid office, a forgiveness of $10,000 would free at least 12.8 million Americans of their federal student loan debt completely. This is 29% of those with a student loan debt. On the other hand, a forgiveness of $20,000 —as it was initially discussed— would render at least 21.1 million borrowers debt free.
The average federal student loan debt per borrower is $35,210 while the average private student loan debt per borrower is $34,600
With the average federal student loan varying by state, thanks to data shared by The Institute for College Access and Success we can see that New Hampshire tops as the state with the highest average balance per student with $39,928 and Utah appears as the state with the lowest debt with $18,344.
On the other hand, according to Enterval Analytics, the average private student loan varies depending on whether the institution is public or private. 10% of the students who earned a bachelor’s degree from a public four-year school graduated with $32,100 in private student loan debt, while another 13% who attended four-year private schools graduated with $42,800 in private loans.
Women hold nearly two-thirds of the total student loan debt in the US
The burden of student loan debt is not shared evenly by men and women. Women, on average, borrow more for their studies. According to data from the American Association of University Women (AAUW), on average, women who earn their bachelor’s degree owe $2,700 more than men upon graduation, and they take about two years longer to pay it off. This is partly due to the gender pay gap, the unemployment crisis facing recent graduates and the growing cost of education.
The gender wage gap and the racial wage gap also affect the average student loan debt
The same data from AAUW and a report from the Federal Reserve Bank of St. Louis showed that young adult women and Black adults are more likely to have student loan debt than young adult males and young white adults. Black women carry the highest average student loan debt with $37,558, followed by Black men with $35,665 on average, and white women come third with $31,346 on average.
An average high school graduate could expect up to $54.921 of student loan debt
According to the Education Data Initiative, in 2023, new borrowers are acquiring an average of $37,338 in federal student loan debt and $54,921 in private student loan debt. These numbers could increase, though, as tuition costs are expected to continually rise at both public and private colleges.
It takes on average more than 20 years to pay of the student debt
Research.com conducted a survey on 61,000 individuals and concluded that student loan borrowers take on average more than 20 years to pay off their debt. However, keep in mind that the amount of time required to pay off student loans depends on the type of loan, repayment plan, and your salary after graduating.
For example, if you have a federal student loan, you’ll generally be placed on the standard 10-year repayment plan. Still, you can switch to a different repayment plan that could extend your term. If, on the other hand, you take a private student loan, you’ll typically have five to 25 years to repay it, although it also depends on the lender. Keep in mind that private student loans don’t offer the repayment options that federal loans do: the only way to change your term on a private student loan is to refinance.
PSLF has forgiven more than $42 billion through its program
The Public Service Loan Forgiveness program — or PSLF — is one of the alternatives in which many students can have their student loan debt forgiven, even if Biden’s initiative didn’t pass through. It basically is a federal program that can help you pay off your student loans if you work in public service for a certain amount of time. By May 2023, according to the Department of Education, more than 615,000 borrowers had a total of $42 billion forgiven through the program. This was due to modifications made by the Biden-Harris Administration that made qualifying for this forgiveness easier.
PSLF forgived an average of $73,400 per borrower
Based on a report by AEI, The average amount forgiven per borrower through PSLF was $73,400 for nearly 170,000 borrowers in June 2023.
The number of borrowers who applied to the PSLF more than doubled from 2017 to 2021
Data from the Federal Student Aid Data Center showed that the number of borrowers who have applied for PSLF has increased significantly in recent years, from about 200,000 in 2017 to about 500,000 in 2021. Additionally, it revealed that as of early February 2023,
approximately 453,000 borrowers have been approved for forgiveness under the limited PSLF waiver that was announced by the Department of Education in October 2022.
Final Thoughts
While the path to widespread forgiveness may be full of obstacles, the data we’ve shared today sheds light on the impact and need of continued efforts in this area. As policymakers, educators, and citizens, our collective journey towards a more equitable education system marches on, with the hope that one day, student loans are not an anchor, but a stepping stone to greater opportunities for all. In the meantime, there are plenty of options to up-skill your career without having to borrow a lot of money. Try one of our courses and get the benefits of studying without falling into student debt!
Sources:
National Student Clearinghouse Research Center
Supreme Court Rules to Block Biden’s Project
The Institute for College Access and Success
American Association of University Women
Federal Reserve Bank of St. Louis
Federal Student Aid Data Center
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