Douglas Olsen
Student debt has become a crisis in the United States, with the total amount of debt rising faster than any other source of household debt. In 2020, the amount of student debt totaled nearly $1.6 trillion, more than double the amount in 2008. As of 2024, more than 43 million Americans hold federal student loans, with a collective balance exceeding $1.7 trillion. The median borrower with outstanding student debt owed between $20,000 and $49,999 in 2023, and about a quarter of borrowers owed at least $25,000. Young college graduates with student loans are more likely than those without debt to report struggling financially, with 25- to 39-year-olds with loans saying they are finding it difficult to get by financially.
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What You'll Learn
Student loan default rates
Delinquency rates, which refer to borrowers who are significantly late on their payments, have soared in the aftermath of the pandemic-era repayment relief ending. In April 2025, about 5.8 million federal student loan borrowers, or roughly 31% of borrowers with a payment due, were 90 days or more past due on their payments. This figure represents a sharp increase from previous years, nearly tripling the delinquency rate reported in February 2020, just before the pandemic.
The consequences of defaulting on student loans can be severe and long-lasting. Borrowers may face wage garnishing, legal action, a decline in their credit score, and ineligibility for future benefits such as further student aid or tax breaks. Additionally, defaulted loans can impact an individual's ability to obtain other types of loans, such as home or auto loans.
Certain demographic factors play a role in student loan default rates. According to U.S. Department of Education surveys, 21.8% of Black or African American student loan borrowers have defaulted, compared to 10.1% of Hispanic or Latino borrowers, and 6.1% of White or Caucasian borrowers. Additionally, students who attended private for-profit colleges are more likely to default on their loans than those attending private non-profit colleges. Degree type also influences default rates, with a higher percentage of associate degree holders defaulting compared to bachelor's degree holders.
The financial burden of student loan debt is a pressing issue for many Americans, with young college graduates with student loans reporting greater financial struggles than their peers without loan debt. The median borrower with outstanding student debt owed between $20,000 and $24,999 in 2023, and this amount can be significantly higher for those with postgraduate degrees. The fear of defaulting on student loans weighs heavily on borrowers, impacting their financial decisions and overall well-being.
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Rising education costs
The rising costs of education have burdened many with student debt. In the US, the average annual cost of tuition at a public 4-year college is 40 times higher than it was in 1963. Adjusted for inflation, this amounts to $2,487 as of 2024. Since 1968, the average annual tuition inflation rate at public 4-year institutions has been 6.53%. The cost of tuition at public 4-year institutions increased by 36.7% from 2010 to 2023. After adjusting for currency inflation, college tuition has increased by 197.4% since 1963. The 1980s saw the sharpest rise in tuition inflation, with a 9.16% increase.
Tuition inflation is not consistent, and annual rates have generally trended downward since 2010. However, the average cost of tuition and fees at both private and public universities has risen significantly over the past two decades. Comparing the 2023-2024 and 2024-2025 academic years, tuition rates at private universities increased by 4.2%. The costs of in-state and out-of-state tuition and fees at public universities rose by 4.4% and 3%, respectively.
In the last 20 years, college tuition has doubled, with the average tuition and fees at public four-year schools increasing by 84% between 1999-2000 and 2019-2020. This far outpaced the 15.7% increase in median household income during the same period. In 2020, the average cost of tuition and fees at a public four-year institution represented over 35% of median household income, up from approximately 18% in 1999. For private four-year institutions, tuition and fees represented 137% of median household income in 2020. This trend has made college less affordable for many, particularly those in lower-income brackets.
The rising costs of education have had a significant impact on students and their families. Many individuals are burdened with substantial student debt, with the median borrower with outstanding debt owing between $20,000 and $24,999 in 2023. Among borrowers with postgraduate degrees, the median debt owed was between $40,000 and $49,999. About a quarter of borrowers with postgraduate degrees owed $100,000 or more in 2023.
The high cost of education has also impacted the financial well-being of young college graduates. Those with student loans are more likely to struggle financially than those without. A quarter of college graduates aged 25 to 39 with loans find it difficult to get by financially, compared to 9% of those without loans. Only 29% of young college graduates with student debt consider themselves to be living comfortably.
The rising costs of education have contributed to the student debt crisis in the US, with 42.7 million borrowers owing more than $1.6 trillion in student debt. Many borrowers face challenges in repaying their loans, with more than 5 million borrowers in default. The resumption of loan repayments after the pandemic-era pause has further exacerbated the financial struggles of those with student debt.
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Impact on financial decision-making
Student debt has a significant impact on the financial decision-making of those affected. The burden of student debt can influence individuals' choices regarding their careers, living situations, and even their willingness to take on other financial commitments, such as mortgages or credit card debt.
According to a Bankrate survey, 59% of US adults with student loans reported that their debt has caused them to delay important financial decisions. This could include decisions such as purchasing a home, starting a family, or making investments. The same survey also revealed that 24% of respondents with student debt did not believe they would ever be able to pay it off, indicating a sense of financial hopelessness.
The median borrower with outstanding student debt in the US owed between $20,000 and $24,999 in 2023. However, this amount varies depending on the level of education attained. For example, the median debt for those with a postgraduate degree was between $40,000 and $49,999, and about a quarter of these individuals owed $100,000 or more. As a result, many borrowers find themselves facing a substantial financial burden that can affect their financial choices and opportunities for years to come.
Young college graduates with student loans are more likely to report financial struggles than their peers without debt. 25 to 39-year-old graduates with loans are more likely to say they are "finding it difficult to get by financially" or are "just getting by" compared to their non-loan counterparts. This disparity highlights how student debt can impact an individual's ability to achieve financial stability and security in the years following graduation.
The challenge of repaying student loans is further exacerbated by rising interest rates and the potential for loans to go into default. As of April 2025, about 5.8 million federal student loan borrowers were 90 days or more past due on their payments, with approximately 1.8 million at risk of falling into default. Defaulting on student loans can have severe consequences, including wage garnishment, negative impacts on credit scores, and long-term financial difficulties.
The COVID-19 pandemic also played a role in the student debt crisis, with the Trump administration pausing repayments during this period. When repayments resumed, many borrowers struggled to keep up with their loan obligations, leading to a rise in delinquency and default rates.
Overall, student debt has a profound impact on the financial decision-making of millions of Americans. It influences their career choices, purchasing power, and overall financial stability. The growing student debt crisis in the US underscores the need for effective solutions to alleviate the burden on borrowers and prevent long-term financial hardship.
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Graduate school debt
The median borrower with outstanding student debt owed between $20,000 and $24,999 in 2023. However, the numbers are significantly higher for those with postgraduate degrees. The median debt for borrowers with a postgraduate degree was between $40,000 and $49,999 in the same year. About a quarter of these advanced degree holders (26%) owed $100,000 or more in 2023, which is a substantial amount.
The average debt among graduate students varies depending on the type of institution attended. For master's degree holders, the average debt ranges from $60,000 to over $80,000, with those attending private, for-profit institutions incurring the highest debt. PhD graduates have even higher debt, with an average total debt of $88,368 in 2020, and those who attended private, nonprofit institutions owing over $250,000.
The high cost of graduate school can be attributed to various factors, including tuition fees, living expenses, and the opportunity cost of pursuing further education instead of working full-time. Additionally, graduate programs often require specialized equipment, research costs, and other associated expenses, which can drive up the overall cost of attendance.
The financial implications of graduate school debt can be significant. Young college graduates with student loans are more likely to struggle financially than those without debt. They may face challenges in managing their loan repayments, especially if they are unable to secure high-paying jobs immediately after graduation. The burden of debt can impact their ability to make major life decisions, such as purchasing a home or starting a family.
To address the challenges associated with graduate school debt, individuals can explore various repayment options, such as income-based repayment plans or loan consolidation. Seeking financial advice and creating a budget to manage repayments can also be helpful. Additionally, some individuals may be eligible for loan forgiveness programs or income-driven repayment plans offered by the government or specific institutions.
In summary, graduate school debt is a substantial burden for many individuals in the United States. With the cost of higher education continuing to rise, it is important for prospective students to carefully consider the financial implications of pursuing advanced degrees and to explore various repayment options to manage their debt effectively.
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Interest rates and repayment plans
As of April 2025, about 5.8 million federal student loan borrowers in the US—roughly 31%—were 90 days or more past due on their payments, with US federal student loan debt totalling almost $1.7 trillion. The Biden-Harris Administration's decision to end the pandemic-era pause on repayments has left many facing colossal debts.
To address the challenges posed by interest rates, the US Department of Education has offered interest-free forbearance or deferment periods for borrowers with federal student loans. During these periods, borrowers are not required to make payments, providing temporary relief. However, interest continues to accrue on these loans, ultimately increasing the total amount owed.
In contrast, income-driven repayment plans, such as the Income-Based Repayment Plan, tie borrowers' monthly payments to their income and family size. These plans often offer longer repayment terms, which can reduce monthly payments and provide borrowers with more manageable repayment options. Peter, a museum worker in Washington state, has implemented an income-driven repayment plan to manage his nearly $22,000 in federal loan debt. While this strategy helps him avoid default, he acknowledges that paying off the loans seems far-fetched given the high cost of living.
The Department of Education encourages borrowers to explore available repayment plans using tools like the Loan Simulator to estimate monthly payments and determine the best option for their financial situation. Additionally, the Department has provided resources and support through email and social media campaigns to assist borrowers in selecting the right repayment plan.
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Frequently asked questions
As of 2024, more than 43 million Americans hold federal student loans, with a collective balance exceeding $1.7 trillion.
24% of Americans with student loan debt say they don't expect to ever be able to pay it off. 21% of households in the US have student debt, and young college graduates with student loans are more likely than those without debt to say they struggle financially.
The average federal student loan debt balance is $39,075, while the total average balance (including private loan debt) may be as high as $42,673. The median borrower with outstanding student debt owed between $20,000 and $24,999 in 2023.
The number of people with student debt has been steadily increasing over the past decade. In 1989, only 8% of households in the US had student debt, compared to 21% in 2019. The amount of student debt in 2020 totaled nearly $1.6 trillion, more than double the $600 billion in 2008.
There are several reasons for the rise in student loan debt. College has become more expensive, with tuition and fees increasing. More people are attending college, including more low-income and middle-income people who may need to borrow to afford it. Additionally, graduate school debt has increased significantly, and while some graduate programs lead to high-paying careers, others may not provide a good economic payoff, making it difficult for borrowers to repay their loans.
