College-Bound Grads Could Exit With $38K Student Loan Debt

A 2021 high school graduate who will depend on student loans to pay for college could expect to borrow $38,147 for their bachelor’s degree, according to a new NerdWallet analysis.

Around 45% of 2021 high school grads may enroll in four-year colleges, based on prior years’ enrollment data. NerdWallet’s analysis of the most recent data available from the National Center for Education Statistics, or NCES, shows that:

  • 45% of these enrollees would take on student loan debt.
  • It will take them about five years, on average, to get a bachelor's degree.
  • Assuming they relied on loans to pay for each of the five years, borrowers could face a post-graduation debt load of more than $38,000.

For this analysis, we limited our scope to four-year public colleges and universities. Private institutions tend to be costlier and may have a higher number of borrowers than public institutions.

This analysis does have some limitations due to the COVID-19 pandemic: The most recent available data from the NCES is from the 2018-19 academic year. We used this data and the data from prior years to make projections about the percentage of high school graduates who will enroll in a four-year college, the percentage of them who will be awarded student loans and the amount of student loans they’ll ultimately take on. We’ll only know for sure in retrospect if our projections are overestimations, but all calculations have been made based on past high school graduation enrollment rates and student loan loads.

“Even after a rough year for students due to the pandemic and the possibility of taking on $38,000 in loans over the next five years, college is still a worthwhile investment,” says Anna Helhoski, NerdWallet’s authority on student loans. “Completing at least a bachelor’s degree typically leads to better job opportunities and more income over your lifetime.”

If you’re a 2021 high school graduate (or the parent of one), here are some ways to minimize student loan debt before, during and after college.

1. Submit the FAFSA annually

The Free Application for Federal Student Aid, or FAFSA, is a form that should be submitted each year you plan to attend college. In addition to qualifying you for federal student loans, it will also be used to assess eligibility for federal, state and school grants, scholarships and work-study programs, all of which could reduce your post-graduation debt balance.

For the 2021-22 academic year, the FAFSA opened on Oct. 1, 2020, but you can still fill it out until June 30, 2022.

If you plan to enroll in the upcoming fall semester and haven’t yet applied for aid, do so as soon as possible. Filing the FAFSA close to the open date can improve your chances of qualifying for grant, scholarship and work-study aid before it runs out.

Also, find the FAFSA deadlines for your state and college. These dates are typically earlier than the federal deadline and filing on time can qualify you for state and institutional grants and scholarships.

If your family’s financial situation changes — maybe a parent loses a job or becomes disabled — you can appeal a financial aid decision that was made using data that no longer reflects your household finances. In this case, email your school’s financial aid office to ask about its appeals guidelines or request a professional judgment. You’ll need to provide documentation about your situation and can request a specific sum to make up the deficit. Appeals aren’t always successful, but there’s no harm in asking for what you need.

2. Apply for scholarships beyond the first year

Scholarships aren’t available for students in their first year only; returning students can also apply for this aid. In addition to filling out the FAFSA each year, you may find scholarships through your school’s financial aid office, community organizations or local businesses, as well as scholarship databases like the Department of Labor’s Scholarship Finder tool. Check out NerdWallet’s guide on how to get a scholarship if you aren’t sure where to start.

“Ideally, you’ll get a scholarship that’s renewable each year, but in lieu of those needle-in-a-haystack scholarships, there are always new opportunities to find free money for college,” Helhoski says.

3. Work part-time to help cover school expenses

For most full-time students, it’s unlikely that they’ll be able to cover tuition and living expenses by working a part-time job, according to a NerdWallet analysis on college costs and wage growth. But those who can balance a full class schedule with part-time work may be able to reduce their student loan needs.

Submitting the FAFSA can help you qualify for work-study aid, which is a federal- or state-funded program that helps students with financial need obtain part-time work. Of course, if you don’t receive work-study aid, you can look for a part-time job on your own that’s flexible enough to accommodate your class schedule and study time.

4. Borrow only what’s necessary

If you’re offered more federal student loans than you need to pay college costs, you may be tempted to accept this extra aid. (While you can’t be awarded aid that exceeds your school’s cost of attendance, those with a part-time job or financial help from family might not actually need the full amount offered.) After all, college students are notoriously strapped for cash. But it’s best to accept only the loans you need to minimize the amount you’ll have to pay back later.

Not quite sure how much you’ll need? Your college should have a net price calculator on its website to estimate attendance costs. If you need to take out additional student loans to cover living expenses, try to minimize this amount by setting a budget.

“It can be easy to overestimate what you’ll reasonably be able to repay each month after college,” Helhoski says. “Do your future self a favor and be realistic about what will be affordable for you post-grad.”

To determine what a manageable college debt load looks like, aim for student loan payments that don’t exceed 10% of your projected after-tax monthly income your first year out of school. For example, someone earning $50,000 a year, shouldn’t pay more than $279 a month toward student debt. You can estimate future salaries using the U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook.

5. Aim to graduate faster

According to the National Student Clearinghouse, it takes an average of five years to obtain a bachelor’s degree. But if you can finish in the traditional four years, you can enter the workforce sooner and possibly cut down on the amount you’ll owe in loans.

Fifteen credit hours is the typical course load for a semester. Colleges generally charge by the credit hour, but also could have a range of credit hours that cost the same amount. For example, a university might charge the same flat rate for taking 12-18 credit hours. By taking a fuller course load, you can reduce the amount of tuition you’ll have to pay and the loans needed to pay for it.

This might not be possible, particularly if you’re also working or participating in time-intensive extracurricular activities. But if you can swing it, you may be able to get a diploma ahead of schedule.

6. Explore repayment options while in school

You just graduated from high school, so it may seem absurd to consider the bills you’ll need to pay after graduating from college, but it’s a good idea to know the options.

Federal loans won’t cover the full amount of projected student loans ($38,147 for a bachelor’s degree) the average incoming student will require, according to our analysis. Instead, federal loans are capped at $31,000 for undergraduate students. If you need more than that, you’ll need parent loans or private loans.

Let’s assume you take out the full $31,000 in federal student loans and it’s unsubsidized (which means you’ll eventually have to pay the interest you accrue while in school). If you don’t opt for another repayment plan, you’ll automatically be funneled into the standard 10-year plan. But depending on your post-grad finances, you may want to look into an income-based program or an extended repayment plan.

In the scenario above, the Revised Pay As You Earn, or REPAYE, plan has the highest payments, the shortest timeframe and the smallest total amount repaid. It’s the one income-driven plan that most Direct loan borrowers are eligible for. REPAYE caps monthly payments at 10% of your discretionary income and forgives your remaining balance after 20 years of payments, so this can be helpful for graduates with lower incomes.

The extended repayment plan is the smallest monthly payment with the longest time frame to pay off your loans, but the downside is you’ll pay almost an additional $10,000 over the repayment period.

“When you have a higher-than-average income, an income-driven repayment plan could be the fastest way to get rid of your debt — even quicker than on a standard plan,” Helhoski says. “That also means your monthly payments could be higher than on a standard plan since the amount you pay corresponds with your income. However, a plan like REPAYE will still provide a critical safety net if you lose your job or your income drops.”

An income-driven plan like REPAYE is also the only one that will ensure your payments are eligible for Public Service Loan Forgiveness if you’re working full time for an eligible employer.

If you take on loans from private lenders, you may want to consider refinancing your student loans for a lower interest rate, which depends on your credit score. Proceed with caution when it comes to refinancing federal loans, though, as you could lose access to income-based repayment programs as well as potential student loan forgiveness.


Projected college enrollment, the percentage of students who are awarded student loans and debt amounts for the high school class of 2021 were calculated using data from the National Center for Education Statistics.

These projections represent a conservative estimate as they focus on public, four-year institutions only. Private nonprofit and for-profit institutions generally have higher student loan award rates and higher loan amounts, on average, when compared with public institutions.

The average student loan amounts in the group analyzed grew 5.3% annually from 2000 to 2005, and 8% annually from 2005 to 2010. The loan amounts slowed dramatically from 2010 through 2018 to a rate of 1.7% year over year, which includes inflation and is the most recent data available. This analysis assumes this continued conservative growth rate (1.7%) from 2019 on.

The analysis assumes a student who takes out student loans will borrow each year of their undergraduate career.

The calculations assume a five-year undergraduate career, based on estimates of the average time required to complete a bachelor’s degree from the National Student Clearinghouse.

Repayment estimates are based on all unsubsidized loans, each accruing 2.75% interest annually, where a total of $34,039 is owed on $31,000 in loans (the federal maximum) at the beginning of the repayment period. This interest rate is an extremely conservative one; it’s the 2020-21 rate for newly disbursed student loans, but in the past, rates have been higher and future loans could be disbursed at higher rates. Income-based repayment is on a static annual income of $61,902, based on a Class of 2019 estimate by the National Association of Colleges and Employers plus an average annual inflation rate of 2% to 2026.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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