Student Loan Debt
The total volume of student loan debt has been growing for more than two decades in the United States. As of early 2019, student debt has grown to be at a staggering $1.5 trillion – a sum 50% larger than the $1.02 trillion owed in US credit card debt. And it’s still growing!
Nearly 70% of graduating college students from 2018 had to take out a student loan to pay for their education. The average level of student debt among these graduates was almost $30,000.
Student Loan Debt Statistics
Let’s start with a general picture of the student loan landscape. The most current records show there is:
- $ 1.56 trillion in total United States debt from student loans.
- Over 44.7 million Americans carry some form of student debt.
- Student loan debt sees the highest rate of misbehavior in terms of repayment. Almost 12% of student loans are overdue by 90+ days or remain in default. Comparatively, delinquency from credit card debt stands at 8%, car loan debt delinquency at 4.5%, and equity lines of credit for housing & home mortgage delinquency rates are much lower than anything else at roughly 1% for both.
- A regular payment for a debtor not in deferment is around $393 monthly for student debt.
- However, the average payment paid towards student loan debt from debtors, not in deferment is closer $222 monthly.
- 65% of seniors graduating from public & nonprofit colleges by the end of 2017 carried some form of debt from student loans.
- Average financial obligation at graduation from the public as well as not-for-profit colleges was close $28,700 in 2017, up 1% from the same time in 2016.
- Roughly 2/3 (66%) of students graduating from public universities had loans (average debt of $25,550)
- More than 3/4 (76%) of students graduating from private, nonprofit colleges had student debt (typical student loan debt of $32,500)
- 88% of graduates from for-profit universities had student loan debt (average debt around $40,000)
- Around 81% of student loan debt carried is owed to the federal government while the remaining 19% is owed to private financial institutions.
- 48% of debtors who went to for-profit universities default within 12 years, a massive increase from the 12% of public college attendees who default, and 14% of not-for-profit university students who default on their student loans.
- 13% of student loan debt is carried by those who are still undergoing their education.
- 1 in 4 Americans under the age of 60 carry student debt.
Types of Student Loans
Student loans can come from resources such as a bank, private financing company, or the federal government. Student debt from the federal government generally tend to have more advantages than financing offered from banks or private lenders.
Federal Student Loans
The U.S. Department of Education’s federal student financing program is the William D. Ford Federal Direct Funding (Straight Loan) Program. Under this program, the U.S. Division of Education is your lending institution. There are four sorts of Direct Financings available:
- Direct Subsidized Student Loans are financing options offered to qualified undergrad students who demonstrate economic difficulty when trying to cover the tuition of higher education at a university or occupational school.
- Direct Unsubsidized Student Loans are loans made to eligible undergraduate, grad, and trainees of specialist fields, but qualification for this type of federal loan is not based on economic need.
- Direct Plus Loans are a type of student loan made available to graduate or specialist pupils as well as parents of students who are dependents to help pay for education expenditures not covered by other various forms of financial aid. Qualification is not based on economic status, but a credit check is performed on all candidates beforehand. Potential borrowers who have an unfavorable credit history have to fulfill further requirements to be eligible for this type of student loan.
- Direct Consolidation Loans enable a debtor to incorporate all federal student loans that qualify into a single form of debt from one lender.
How Much Can Be Borrowed with a Federal Student Loan?
With each of these federal student loans, the total amount that one can borrow from the government depends on the level of education they are going for.
As an undergraduate, the most a student can obtain every year in Subsidized Loans & Unsubsidized Loans varies from $5,500 to $12,500 each year, depending on how long the debtor remains in college as well as the status of their dependency.
If you are a grad or specialist student, you can borrow approximately $20,500 annually in Direct Unsubsidized Loans. Additionally, Direct PLUS Loans can be made use of for the remainder of your college costs not covered by other financial assistance.
As the parent of an undergraduate student who is a dependent, you can receive a Direct PLUS Financing for the remainder of your youngster’s college for the additional costs that are not covered by other forms of student loans.
How Can I Apply for a Federal Student Loan?
To obtain a student loan from the federal government, you need to first complete and send an application for Federal Student Aid (FAFSA), which is a free submission. Based on the outcome of your FAFSA submission, your college will send you a financial aid offer, which may include financial assistance from the government. Your institution may give you more information on exactly how to approve all or some parts of the loan.
The Bottom Line with Student Loan Debt
Debt from student loans has ballooned in the previous couple of years, mainly because the expenses related to college; tuition, costs, real estate, and even books, have expanded much quicker than the average earnings per family.
In 2018, the ordinary expense of one year at a public college was around $21,370, which is 35% of the average income per household of $61,372. To place this in context, this amount could purchase a brand-new 2019 Audi A4, pay for a wedding with hundreds of guests, or score four tickets at the halfway line at the Super Bowl. This sum is also equivalent to an 18% down payment on a $205,000 house.
The conventional repayment timetable for federal student debt is close to 10 years, but many studies suggest it actually takes four-year degree owners nearly 20 years to completely repay their loan debt. This should tell you that taking out a student loan is no minor obligation and it should be looked at similarly to buying a house or a car in terms of the implications on your financial history.
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