The Roaming Economist is not a legal or financial professional and any advice or opinions expressed should be taken as general information. Please read my DISCLOSURE for more information.
Does the harsh reality of student loans hit you around the same time each month? Feel like you’re drowning?
Well, you’re not alone in that feeling. Being overwhelmed by student debt seems to be a right of passage for our generation, unfortunately.
That’s how I feel if I stop and think about it too long – overwhelmed. Every 14th when it’s time for me to pay another chunk of that expensive education I got, I’m completely overwhelmed. It hurts whenever I see almost two thousand dollars leave my bank account. I know I’m paying for something meaningful, my degree, but it still stings.
Over recent years, I have heard people mention the student debt crisis more and more and for a good reason. The situation only seems to be getting worse.
In this post, I will share the nine most shocking U.S. student debt statistics of 2019 and my thoughts on the impact these stats could have.
1. On average it can take 19.7 years to pay off bachelor's degree loans and 23 years for graduate degree.
A study by the OneWisconsin Institute revealed it takes graduates of Wisconsin universities an average of 19.7 years to pay off bachelor’s degree loans. It takes graduates 23 years to fully pay back graduate degree loans. Wisconsin isn’t even the state with the highest student loan debt. Wisconsin ranks number 21 in the U.S. with an average student loan debt of $29,569 for graduates.¹
Almost twenty years to pay off a bachelor’s degree! This means when we enter a university at age eighteen, we are taking on debt that will take us longer to pay back than we’ve been alive.
Let’s picture an example. A university student starts freshman year at eighteen. They have chosen a four-year program, nothing delays their graduation, and they graduate on schedule at the age of twenty-two. If our example student falls in line with this statistic, they will pay off that debt in twenty years when they are forty-two. Forty-two!
How big of an impact do you think that will have on that student’s ability to save for retirement or set other financial goals? The lasting economic effects of incurring such debt is barely discussed with high school graduates when they are deciding to take on these enormous amounts of debt.
2. 5.1 million borrowers are currently defaulting on their student loans.
The majority of borrowers defaulting are students who began a higher education and for whatever reason chose not to finish it. Not only is it harder to refinance these loans if you didn’t get your degree, but you also don’t have the higher income the degree usually affords. This leaves many people stuck in high-interest-rate loans with payments their current income can’t support.
This statistic shows how important it is to incorporate financial education into high schools. Many kids don’t get that at home. Even some who do don’t fully understand the lasting effects taking on this student loan debt will have on them years later.
Many high school students may apply and attend college because that’s the expected next step and not because they have a plan in mind for a specific career. College isn’t for everyone, and unfortunately, some students realize it’s not for them after they’ve accrued thousands of dollars in student loans.
3. Two to three hundred dollars is the typical monthly student loan payment.
The typical monthly student loan payment is $200-300 per month.²
That is a lot of money! No matter how much you make, a few hundred dollars is still a lot of money. That’s just the typical student loan payment.
Borrowers who seek degrees beyond a bachelor’s or go to a private university likely have payments much higher than this. Personally, my monthly payment is over two thousand dollars.
Having such a large sum already obligated to something else each month significantly hinders your power to save and reach other financial goals.
4. Adults sixty and older are the fastest growing age group among student loan borrowers.
Surprisingly, the fastest-growing age group taking on student loan debt isn’t the high school graduates getting ready to begin at a university. Many grandparents are taking on student debt for their grandchildren entering college. Adults aged sixty to sixty-nine have seen a 71.5% increase in student debt over the past five years.³ This is the highest percentage increase of any age group.
Who else thought this was mostly an issue millennials faced? I think most of us tend to associate student loan debt as a struggle for people thirty-five and younger. This statistic shows it isn’t just affecting the younger generations – this a problem affecting all of us.
With age group sixty-plus taking on student loan debt, think of how this will affect their ability to retire. Many of them might have to stay in the workforce longer, resulting in fewer jobs opening up for those just graduating college.
5. On average, it takes 3 more years to save for a first-home down payment with student loan debt than without.
And people wonder why I still rent?
Such a large portion of your income gets eaten up by loans each month. It makes sense that many young professionals take longer to get a down payment for their first home. This delay is another example of the lasting effects taking on student debt can have on your overall financial goals.
It is also more challenging to secure a conventional mortgage loan with such a high debt-to-income ratio. Especially when many degrees don’t give the borrower a significant enough income boost to pay their loans.
6. Tuition has increased by twice the rate of inflation over the past 20 years.
Gone are the days of being able to work your way through college. The number of hours you’d need to work would be enormous. My husband tried this but didn’t have enough time to study if he worked the hours required.
Working to pay for your degree might be a little more possible if you attend a community college where costs are lower. However, tuition at larger universities, private universities, and degree programs beyond a bachelor’s would be extremely difficult to “pay as you go.”
Some doctorates don’t even allow you to hold a job while in school. The dental school I attended didn’t let students have a job during our four years there. To my understanding, this is the norm. Our class time was 8 am to 5 pm Monday through Friday, and they wanted us focusing on studies outside of that.
7. Student loan debt is the second highest consumer debt behind mortgage debt.
This statistic highlights how widespread the problem is. It’s getting to the point where most people have the misfortune of having student loan debt. Most of us have to figure out how to cope with it.
8. More than 80% of borrowers do not participate in income based repayment plans.
Income-based repayment plans are one of the benefits available to you if you have federal student loans. If your student debt is high compared to your income, you can apply for one of these plans and get your monthly payment drastically lowered.
For those starting with a lower salary or who don’t have the higher-earning power of some degrees, this plan may be a good option. It would help stop a student debt bill from crushing your ability to pay other monthly expenses.
Although income-based repayment plans can work in your favor if you are having trouble paying your loans as well as your bills, this plan isn’t beneficial for everyone. With lower monthly payments, you are paying off less of your principal loan balance and interest will continue to build. This is the major downside of an income-based plan.
I am one of the 80% who choose not to participate in an income-based repayment plan. Even at a time when having a lower monthly payment would have helped, I didn’t want to apply for the program. Due to the high dollar amount of my loans, I chose not to because I knew a payment based on my income would mean I’d never get ahead of interest. By selecting a lower payment amount, I’d be going into more debt every month.
9. More than 2.5 million borrowers have debt greater than $100,000.
Although the average student loan debt is $38,390, over 2.5 million borrowers owe more than $100,000, states an article published by Forbes in February 2019. Of those borrowers, 610,000 of them have debt over $200,000.
Six figures of debt are daunting to overcome. It’s hard to see the progress even when your monthly loan payment is enormous. The amount you owe barely seems to decrease. Sometimes even when you can see that number slowly getting lower, it’s mentally draining.
I know that feeling. Between my husband and I, we had $204,760 in student loan debt. We have been doing all we can to chip away at it over the past three years and have made a considerable dent in it, but we are still in the six figures.
Have these student debt statistics surprised you as much as they did me? Most of us have a sense that the situation isn’t great. Let’s face it; most of the people I know have student debt. It’s so common now; it’s ridiculously called “good debt.”
However, I didn’t realize just how dire things were until I started looking at the statistics and seeing the exact numbers involved. We can talk about this crisis all day long, but the real question is – how do we fix it?
That is probably the most loaded question I could have asked here, and my answer – I have no idea. Honestly, I don’t know what the best course of action would be to fix the problem for those who have already taken on student loan debt.
But there should be some genuine effort focused on preventing it for the younger generation, maybe incorporated into the high school curriculum or a college outreach program. Before a student takes on debt, they should know this isn’t the only path; it’s not expected.
College isn’t for everyone, and if it’s not for them, that’s okay. If it is for them, they need to know the impact it will have and to take out as few loans as possible. I think many may take out as much as is offered to them because they think, “Well, that’s what you do.” Then they spend as much as they want since they don’t have to worry about paying it back until later. Better financial education is needed in schools to help prevent this situation for the newest generation of kids entering universities.