Everyone knows that student loans in the U.S. have reached astronomical levels.
It’s talked about on the news, on the Internet, and among those who themselves are burdened by high levels of student loan debt.
But, just how bad is it?
Recent statistics show that there are more than 44 million student loan borrowers with a collective $1.5 trillion in student loan debt in the United States.
The average monthly student loan payment is $393 per month.
Over 11 percent of these borrowers have student loans in delinquency or default.
This is the highest 90+ delinquency rate of all household debt, coming in substantially higher than the delinquency rate on mortgages (1.1 percent) and auto loans (4 percent).
While 11 percent is already a staggering figure, this rate is expected to reach almost 40 percent by 2023.
These looming statistics leave college graduates repaying their loans feeling helpless and stuck.
While those preparing to enter college with the assistance of student loans have to heavily consider whether the debt incurred during school will pay off in the long run.
What is to Blame for The Issue?
Several key factors have led to the student loan debt crisis, beginning with rising tuition prices.
The average price of tuition and fees for the 2018-19 academic year at a four-year public university was $10,230.
This cost steeply climbed to $35,830 for students attending a four-year private institution.
Compare this to 1988-89, when the average four-year public university would only set you back $3,360, and the average four-year private institution $17,010 (with prices adjusted to reflect 2018 dollars).
Student loans are also being issued at unprecedented rates as more individuals pursue higher education.
In 2016, more than 33 percent of Americans possessed a bachelor’s degree, compared to 1940 when only 4.6 percent of individuals had reached that level of education.
Combine these factors with the increased cost of borrowing (interest rates jumped to 5 percent for undergraduates and 6.6 percent for graduate students in 2018), and the high rate of delinquency, and it’s easy to see how the American student loan system has reached the astronomical debt levels that it has.
Broader Implications
Student loan debt doesn’t only affect the individual borrowers – it has the potential to have a wider economic impact.
While the housing market has made a strong recovery since the 2008 financial crisis, student loan debt delays home ownership for the average student loan borrower by seven years.
This could result in decreasing the demand for housing, potentially impacting the value of homes.
Further, student loan borrowers are typically more reluctant to utilize other types of credit or to purchase other goods and services, in an attempt to make paying down their student loan debt their first priority.
This overall decrease in other spending means less profit for all types of businesses, and may eventually have an impact on the growth of the economy.
What’s Next?
There is currently no set plan to address the student loan debt crisis, and borrowers’ best solution for now may be to educate themselves as much as possible about the implications of borrowing for college and how to best stay on top of their student loan obligations.
If you’re having problems making your monthly student loan payment, you could benefit from loan consolidation or a loan forgiveness repayment plan.
Give My Financial Solutions a call at (760) 542-6202 and a loan specialist can walk you through your options.
We offer a 100% free consultation to see what you qualify for.