You know it's a big problem. But do you know exactly how big?
Everyone knows that student loan debt is a crisis in this country, but not as many people realize just how severe and widespread it is. It's a story best told by statistics, and those statistics show that this is an issue for millions of Americans that shows no signs of abating. Here are five of the most surprising facts about the student debt crisis.
1. Student loan debt is a $1.5 trillion problem
Americans owe more than $1.53 trillion in student loan debt, according to the latest data from the Federal Reserve, and that number shows no sign of decreasing anytime soon. About 44.7 million people carry some student debt.
The driving force behind this crisis has been the rising cost of tuition and room and board at public and private universities nationwide. The cost of attending college has more than doubled in real terms since 1971, according to The College Board. That has meant that families have to set aside larger and larger percentages of their income in order to save enough for a college education. And as they've become increasingly unable to keep up, student loan debt has ballooned.
2. The average 2018 graduate left school with $29,800 in debt
The average annual salary for a 2018 college graduate is $48,400, according to PayScale, which means that $29,800 in debt is more than half their salary. A sizable chunk of that money will go toward student loan repayment instead of saving for their futures.
The average graduate's student loan debt is enough to put a down payment on a home, buy a new car, pay for a wedding, or even start a business. But for most young adults, these dreams end up deferred for years or even decades while they struggle to repay the cost of their education.
3. The average student loan payment is between $200 and $299 per month
The average college graduate must pay between $200 and $299 per month toward their student loan debt, according to the Federal Reserve. If we assume these graduates are making about $48,400 per year, that comes out to about $4,033 in monthly earnings.
That means between 5% and 7.5% of the average new college graduate's total earnings goes toward their student loans. And keep in mind that their take-home pay will actually be less than $4,033 per month because they'll have taxes taken out of their paychecks.
4. Nearly 11% of student loans were more than 90 days past due
Although this indicates that the majority of student loan borrowers are able to keep up with their payments enough to avoid default, a 10.83% delinquency rate is high compared to that of other types of debt. The Federal Reserve Bank of New York reported that although 10.83% of student loan borrowers can't keep up with their payments, only 8.32% of individuals with credit card debt and only 4.64% of those who are paying off auto loans had the same issue.
5. Only 56% of federal student loan debt is actually being repaid
As of the second quarter of 2019, only 56% of the outstanding federal student loan debt is actively being repaid, according to the Department of Education. The remaining 44% are either in default or on hold. The most common reason students put their loans on hold is because they're still in school or newly graduated and not yet required to make payments, but others place their loans in deferment or forbearance because they're unable to keep up with the payments and cover their basic living expenses at the same time.
What to do if you're struggling to repay your student loan debt
There is no easy solution to the student loan crisis, so it’s important to find a way to manage your student loan debt on your own. If you're one of the millions of borrowers struggling to keep up with payments, the first thing you should do is reach out to your student loan servicer to discuss your options. You may be able to switch to a different repayment plan or place your account into temporary deferment or forbearance to avoid default. Refinancing or consolidating multiple student loans into one can also make it easier for you to keep up with your payments.
Consider making lifestyle changes to free up more cash as well, like reducing your discretionary spending, dining out less, and working a little more to increase your monthly cash flow. Put your year-end bonuses and tax refunds toward your student loan debt as well to help you pay it off more quickly.
If you're eligible for public service loan forgiveness (PSLF), military loan forgiveness, or teacher loan forgiveness, talk to your loan servicer to learn what you need to do in order to qualify for these programs. Those who don't qualify for student loan forgiveness should look for employers who offer student loan repayment assistance as an employee benefit.
Digging yourself out of student loan debt is never going to be easy, but it is possible and the sooner you can do so, the easier it will be for you to save for your other long-term goals. Try some of the steps above if you haven't already.
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