Janice Lozano
Student loan debt is now the second-highest consumer debt category after mortgages, with 20% of American adults with undergraduate degrees and 24% of postgraduate degree holders reporting outstanding student loans. The rising cost of higher education has made paying for college a challenge for many students, with tuition, fees, and living expenses continuing to climb. This has resulted in an increasing number of students turning to loans to fund their education. In 2022, 61% of graduates had borrowed funds for school, with 30-40% of undergraduate students taking out federal student loans annually. At private non-profit four-year colleges, 13% of students take out private loans, and 52% take out federal loans, while at public four-year colleges, these figures are 9% and 49%, respectively.
| Characteristics | Values |
|---|---|
| Percentage of students who pay for tuition with loans | 61% of graduates in 2022 |
| 65% of bachelor's degree recipients | |
| 75% of graduates from private 4-year schools | |
| 30-40% of undergraduate students | |
| 28.6% of undergraduate students accepted federal loans in a single year | |
| Average student loan debt | $38,290 per borrower (federal loans) |
| $139.777 billion (private student loan debt) |
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What You'll Learn
Student loan debt is the second-highest consumer debt category after mortgages
Student loan debt is a significant burden for many Americans, and it is now the second-highest consumer debt category after mortgages. In 2024, student loan debt totaled $1.774 trillion in the third quarter, representing 9.82% of all household debt. This amount has been steadily increasing, with a 5-year annual average student loan debt growth rate of 1.66%, outpacing tuition costs. Federal student loan debt per borrower represents a significant portion of the average total consumer debt balance, at 62.1%.
While student loan debt is a concern for many, it is important to note that mortgages still make up the majority of American consumer debt. Mortgage debt totals were $12.594 trillion in 2024 Q3, which is seven times higher than student loan debt. The average mortgage debt is $147,163 per account, nearly four times higher than the average federal student loan debt. From 2020 to 2023, mortgage debt grew almost nine times faster than student loan debt.
The impact of student loan debt is far-reaching and can be more challenging to manage than mortgage debt. Student loan delinquency, for example, can significantly affect credit scores, making it difficult for borrowers to qualify for other types of loans or credit cards. Additionally, student loan interest rates are typically higher than those of 30-year fixed-rate mortgages, and debtors may end up paying interest on interest.
The burden of student loan debt varies across states. In Alabama, the average debt per federal student loan borrower is $37,390, while mortgage debt averages $28,170 per credit consumer. In Alaska, student loans represent 6.18% of total household debt, with the average borrower paying $298 per month toward their student debt.
Overall, while student loan debt is the second-highest consumer debt category, it is a significant concern for many Americans and can have long-lasting financial implications.
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Federal vs private student loans
Federal student loans are provided by the government, while private student loans are offered by banks, credit unions, and other financial institutions. Each loan type has its own eligibility criteria, application process, and terms and conditions.
To apply for federal student loans, you must first complete the Free Application for Federal Student Aid (FAFSA). The FAFSA determines your eligibility for federal student aid, including grants and work-study programs, in addition to loans. Submitting the FAFSA is necessary to receive any federal student aid. It is recommended that you submit your FAFSA before applying for private student loans, as it may impact the amount you need to borrow privately. Private lenders typically require enough time to process your loan application and disburse funds to your school. Funds may be disbursed each semester or all at once, depending on the loan term.
Interest rates for federal and private student loans can vary significantly. Private student loans usually offer a choice between fixed and variable interest rates. Fixed rates provide predictable monthly payments, while variable rates may fluctuate based on the loan's index. Some individuals have reported lower interest rates for private loans, especially after refinancing. However, federal loans may offer more protection and flexibility in repayment options. For example, federal loans can be repaid based on income, and schools with high cohort default rates on federal loans may face sanctions or lose eligibility to participate in federal loan programs.
In general, private student loans have fewer safety nets than federal loans. Borrowing privately can put you at risk of accumulating significant debt without completing your degree. This can happen if your debt-to-income ratio becomes too high, preventing lenders from approving additional loans. As a result, you may be left with substantial loan payments and no degree to help improve your job prospects and income.
While specific statistics on the percentage of students paying for tuition with loans were not readily available, student loan debt is a significant issue in the United States. As of 2025, 20% of American adults with undergraduate degrees and 24% of postgraduate degree holders reported outstanding student loan debt.
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The rising cost of higher education
The high cost of higher education has led to a reliance on loans for many students. At private non-profit four-year colleges, 13% of students have private loans, and 52% have federal loans. In contrast, at public four-year colleges, 9% of students have private loans, and 49% have federal loans. The availability of federal and private loans has made it possible for students to pursue their academic goals, but it has also contributed to the rising cost of tuition.
The introduction of unsubsidized loans in 1993 allowed more students to pay higher tuition fees, increasing demand and putting upward pressure on prices. Each $1,000 of additional borrowing capacity for these students had a significant impact on their willingness to pay for college, resulting in a high passthrough rate to tuition. The Federal Student Loan Program (FSLP) has existed since the late 1960s, and the amount that students can borrow has risen steadily, with total borrowing for undergraduates currently limited to $57,500.
While the availability of loans has helped students finance their education, it has also contributed to the increasing cost of tuition. The passthrough rate from student loans to tuition varies over time based on economic and policy conditions. Policymakers must consider the impact of increasing loan limits and the potential for tuition prices to rise as a result. Additionally, the rise in student loan debt has outpaced tuition costs, with the 5-year annual average student loan debt growth rate at 1.66%, while tuition and fees declined by 0.72% over five years.
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Student loan debt growth rate
Student loan debt is now the second-highest consumer debt category after mortgages. 20% of American adults with undergraduate degrees have outstanding student debt, while 24% of postgraduate degree holders report outstanding student loans. The median former college student currently owes about $19,000, up from $13,000 two decades ago, with adjustments for inflation. Students with graduate degrees often owe far more, with an average of $69,000. Black women have the highest debt load, with an average of $33,000, which is more than three times the amount carried by white men.
The 5-year annual average student loan debt growth rate is 1.66%. This outpaces tuition costs, with tuition and fees declining by 0.72% over five years. In 2024, the total student loan debt increased by $49.238 billion, with federal student loan debt increasing by $36.40 billion, representing 73.9% of the YoY increase in all student loans, federal and private. National student loan debt increased 2.85% YoY in Q4 of 2024, while federal student loan debt increased by 2.27%.
The Biden administration's student loan repayment moratorium has ended, and delinquency rates are expected to rise. As of the end of June, 4.4% of outstanding debt was in some stage of delinquency, 0.1% higher than the first quarter. Transition rates into serious delinquency, defined as 90 or more days past due, have largely been stable for auto loans and credit cards but have increased for student loans and mortgages.
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Student loan default rate
As of 2021, 5.47% of all student loan debt was in default, with an average of 6.24% of student loan debt in default at any given time. This figure dropped to below 1% through the Federal Fresh Start Program. An average of 471,000 students defaulted since 2011 after the second year of repayment. Approximately 4.6 million students enter the repayment phase each year.
The U.S. Department of Education's surveys of recent graduates show that 21.8% of Black/African American student loan borrowers have defaulted on a student loan, with 10.1% of Hispanic/Latino and 6.1% of White/Caucasian recent graduates defaulting. Student borrowers who attended private for-profit colleges are the most likely to default on their loans, whereas private non-profit college attendees are the least likely to default.
The cohort default rate (CDR) is defined by the ED as "the percentage of a school's borrowers who enter repayment on certain FFEL or Direct Loan Program loans during a particular federal fiscal year and default or meet other specified conditions before the end of the second following fiscal year." Schools with high cohort default rates may face sanctions, lose eligibility to participate in federal loan programs, or suffer other consequences.
The consequences of defaulting on student loans can be severe and long-lasting. The entire outstanding balance of the loan, as well as any interest, becomes immediately due. The borrower loses benefit eligibility, including further student aid, deferment or forbearance of payment, and tax benefits. Their credit score declines, and they may be unable to receive other types of loans, such as home and auto loans. The government and private lenders may also garnish wages and withhold tax refunds to collect on defaulted loan payments.
While only 0.3% of borrowers are currently in default, a relatively small number, the number of borrowers in serious delinquency is increasing, signalling potential future issues. As of April 2025, about 5.8 million federal student loan borrowers were 90 days or more past due on their payments, representing a delinquency rate of 31%, the highest ever recorded.
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Frequently asked questions
Around 65% of bachelor’s degree recipients used student loans to help cover costs during their time in college. This percentage is even higher, at around 75% among graduates from private 4-year schools.
Each year, approximately 30 to 40% of undergraduate students take out federal loans. In a single year, 28.6% of undergraduate students accepted federal loans. At private non-profit four-year colleges, 52% of students have federal loans, while at public four-year colleges, this number is slightly lower at 49%.
At private non-profit four-year colleges, 13% of students have private loans, compared to 9% at public four-year colleges.
According to research from U.S. News, in 2022, 61% of graduates had borrowed funds for school.
