“Taxpayers will spend $393 billion on the federal student loan program between 2024 and 2034, or around $3,100 per household.” o Around $221 billion of that cost comes from expected losses on the $1.1 trillion in student loans that the federal government will issue between 2024 and 2034.”
The benefits of higher education come in the form of higher wages, increased productivity, and positive social outcomes — making degree attainment a high-return investment. At the same time, high levels of student debt can also harm certain sectors of the economy and lower the net wealth of households.
Americans owe $1.74 trillion in federal and private student loan debt as of the second quarter of 2024. That's down 0.96% from the second quarter of 2023.
While the president's debt forgiveness plan was struck down in court, calls to forgive student loan debt will continue to be part of the broader policy and political debate. In addition to increasing the national debt and potentially worsening inflation. The same paycheck covers less goods, services, and bills.
"And if you assume there's a likelihood it's canceled, you're going to be more likely to take out more debt up front. That's going to give colleges more pricing power to raise tuition without pressure and to offer more low-value degrees."
Student loan relief contributing to 27% jump in projected federal budget deficit, per CBO. Lawmakers will have to contend with even larger federal budget deficits, according to the Congressional Budget Office.
Whoever gave you the money for your education (the lender) is usually who owns your student loan. This is either the federal government or a private company. But your loan servicer is who handles the loan repayment—and who dishes out the consequences if you don't pay up.
20% of U.S. adults report having paid off student loan debt. The 5-year annual average student loan debt growth rate is 15%. The average student loan debt growth rate outpaces rising tuition costs by 166.9%. In a single year, 31.5% of undergraduate students accepted federal loans.
The benefits of free college include greater educational access for underserved students, a healthier economy, and reduced loan debt. Drawbacks include higher taxes, possible overcrowding, and the threat of quality reduction.
Key Takeaways
Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.
The average monthly student loan payment is an estimated $500 based on previously recorded average payments and median average salaries among college graduates. The average borrower takes 20 years to repay their student loan debt.
Interest rates on federal student loans are set annually by Congress, influenced by the 10-year Treasury note rate plus a fixed increase. Rates are capped at specific limits. Private lenders determine interest rates on private student loans, using benchmarks such as the prime rate.
Overall, 32 percent of students have no responsibility in paying for college, while 39 percent pay for some of it, and 29 percent are responsible for all of it.
According to Experian, average total consumer household debt in 2023 is $104,215. That's up 11% from 2020, when average total consumer debt was $92,727.
According to a recent Forbes Advisor and Talker Research survey of 2,000 adults, one in three respondents said they regret using student loans to finance their education and would not choose that route again if given the opportunity.
If the debt forgiveness program is permitted to move forward, at a time when consumer spending already is high, it could lead to more inflation, Jones said. “We certainly don't have a consumer spending problem right now,” he said.
The average debt for a 4-year Bachelor's degree is $35,530. The average 4-year Bachelor's degree debt from a public college is $31,960. 61% of students who completed a Bachelor's degree have received student loans. The average 4-year Bachelor's degree debt from a private for-profit college is $47,730.
Most student loans — about 92.4% — are owned by the government. Total federal student loan borrowers: 42.7 million. Total outstanding federal student loan debt: $1.64 trillion.
The same principle applies to student loans. In the case of student loans, the student is responsible for repaying the debt — whether they graduated or not. The only exception to this rule are parent PLUS loans, in which the parent — not the student — is responsible for that debt.
The FCRA accounting method says that federal loans make money for the government, while the fair-value method says they cost taxpayers money. In the most recent analysis by the Congressional Budget Office (CBO), FCRA shows a profit of $135 billion over 10 years, whereas fair-value shows a cost of $88 billion.
As an example, a $10,000 student loan with an interest rate of 4 percent in a standard repayment plan would yield the federal government roughly $1,200 a year for ten years. Without that repayment, the government would lose $1,200 of receipts per year, adding to the debt over time.
Research has shown that cancellation would boost GDP by billions of dollars and add up to 1.5 million new jobs, reducing the unemployment rate. 5 Workers who are Black, Latinx, immigrants, women, and those in industries paying low wages are still facing a terrible economic situation with high levels of unemployment.