It's well known among most Americans -- and especially college grads -- that student loan debt is out of control. In fact, educational debt has become a key political issue. It frequently makes headlines and there was even a game show created to help borrowers repay their student loans.
But while the student loan debt crisis is a common topic of conversation, there may be a lot of information about student loans that you don't know. In fact, most people are unaware of how much student loan debt has grown over the years or of who holds the most of it. Few people know the percentage of student loans owed to the federal government instead of private lenders, nor the number of loans that are in default.
These surprising student loan facts shed a lot more light on just how dire the situation is.
1. Student loan debt has more than more than doubled over a decade
According to our recent research , student loan debt hit $1.386 trillion in 2017. This is more than double the $547 billion in student loan debt that was outstanding in 2007.
The total balance owed on student loan debts has been climbing substantially every year, increasing by $70 billion from $1.316 trillion in 2016. The growth in aggregate debt is being driven by the fact that students are borrowing more -- and more students are taking out loans.
In 2017, for example, the average graduate had $28,650 in student debt when leaving college, which was a 1% increase compared with the prior year. And as many as 65% of all students who graduated in 2017 had student loans.
Unfortunately, this is very bad news both for those who owe and for the economy as a whole because high student loan balances mean young people can't buy homes or spend as much on other things. Our research found that recent grads tend to spend an average of 10% of their income on student debt payments alone, which leaves far too little for other financial goals when also factoring in the costs of housing, health insurance, and other necessities.
2. Women owe the vast majority of money on student loans
One surprising finding from our research showed women account for close to two-thirds of the total outstanding balances owed on student loans in the United States. Collectively, women owed around $929 billion in student loans as of the start of 2019.
A large part of the reason that women owe more is that they are earning the majority of bachelor's degrees. But The Ascent's research on the gender pay gap may also point to another reason why women have more educational debt than men do. Women, even with higher educations, earn less than their male counterparts. And lower earnings make it harder to find the extra cash to pay off student loans early.
Lower incomes also make it more likely that women will have to defer payment on loans or choose a longer repayment term with more affordable monthly payments. Deferring payment or stretching out the time to repay can make total repayment costs more expensive for women over time.
3. More than 5 million student loan borrowers are in default
The Motley Fool's research also revealed some data that was both shocking and very troubling: An estimated 5.2 million federal student loan borrowers are currently in default on their loans. Borrowers are considered to have defaulted only if they go a full 270 days without payments. This is obviously a very serious situation, as borrowers who have gone this long without paying are unlikely to be able to rehabilitate their loans easily.
There are also many more borrowers in danger of ending up in default, with as many as 20% of student debtors reportedly behind on payments.
Missing student loan payments can have dire consequences, as can defaulting. Not only does a missed payment or a defaulted loan mean permanent damage to a credit score, but it also can result in legal action to collect on those missing payments, including wage garnishment, seizure of tax refunds, and other aggressive collection efforts.
Since it is very difficult to get student loans discharged in bankruptcy, those who are struggling to pay have few good options. Choosing an income-driven repayment plan before falling behind on payments is often the best approach because these plans ensure affordability by limiting payments to a percentage of your income.
4. The vast majority of student loans are owed to the Department of Education
Finally, our research showed that 92% of outstanding student loans are federal loans rather than private student loans. This is good news because federal loans tend to charge lower interest than private student loans and because federal student loans have many more protections for borrowers.
Those with federal student debt can sometimes qualify to have part of their loans forgiven because they've paid for a long time on an income-driven plan and/or because they do public service work. The federal government also offers the ability to change repayment plans as needed and provides many options to pause payments through forbearance or deferment when necessary.
Interest rates on federal loans also tend to be below interest rates on private student loans, and interest on Direct Subsidized Loans is paid by the government while loans are in deferment. This makes repayment more affordable.
The fact that the government controls so much of the outstanding student loan debt also opens up the possibility for more government interventions in solving the student debt crisis. The government would not have to deal with private student loan lenders if it wanted to put programs in place to help borrowers. This distinguishes the student loan crisis from the housing crisis in 2008, where government efforts to help borrowers to refinance troubled mortgages relied on private lenders to implement their programs.
It’s important to know more about student loan debt
Now you know a few surprising student loan debt facts -- and also the implications of those facts on the student loan crisis. Hopefully, this can help you better understand your own options for your educational debt or will help you more clearly understand the stakes as politicians talk about different solutions to the student loan crisis.