Student loan statistics in USA
Student loan interest rates, credit requirements, repayments, defaults in the United States
In the US, three types of student loans are granted: federal loans, private loans, and refinance loans.
Under federal loans, you have:
- Direct subsidized loans (term 10-25 years; interest rate 5.05 percent for undergraduates for a year ending July 1, 2019)
- Direct unsubsidized loans (10-25 years, 5.05 percent for undergraduates; 6.60 percent for graduates)
- Direct grad PLUS loans (10-25 years, 7.08 percent, grads, parents)
- Direct parent PLUS (10-25 years, undergraduates’ parents, for year ending July 1, 2020)
- Direct consolidation loans (up to 30 years, weighted averages of rates of existing loans)
Private loans include in-school loans for students/parents, income share agreements, and group/purpose-specific loans such as international student/medical school loans. Among refinancing loans are parents PLUS refinance loans and medical school loans.
In the US, 44.7 million Americans, across all demographics and age groups, owed $1.64 trillion in student loans in 2020, according to the US Federal Reserve and the Federal Reserve Bank of New York (this compares with the auto loan debt $1.13 trillion and credit card debt of $1.04 trillion).
Student loan debt in the US was $391 billion in 2005, $811 billion in 2010, and $1.23 trillion in 2015 (Student loan debt crisis).
At the end of September 2019, when the total student federal loan debt was $1.51 trillion, the statistics by loan program showed direct loans at $1.24 trillion (35.1 million borrowers), FFEL (Federal Family Education loan) at $261.1 billion (12.1 million), and Perkins loans (a type of low-interest federal loan) at $6.1 billion (2 million).
Private student loan debt was $13.1 billion in the 2018-19 academic year. Of the student loans granted to the Class of 2018, 17 percent were private loans.
In the Class of 2019, 69 percent of students took out student loans, and they graduated with an average debt of $29,900, including both federal and private debt. Fourteen percent of their parents took out an average of $37,200 in “federal parent PLUS” loans.
For the Class of 2018, the average student loan for members of the Class of 2018 was $29,200 and for all students $32,731. In the case of medical school graduates, it was $196,520, dental school graduates $285,184, and pharmacy school graduates $166,528 for the Class of 2018.
As of 2019, more than 42 million student loan borrowers had a student loan debt of $100,000 or less, three million had a debt of more than $100,000, and 800,000 had a loan debt greater than $200,000.
The largest concentration of student loan debt was $20,000-$40,000, by 9.5 million borrowers, and the largest concentration age-wise was 25-34 years old (15 million borrowers owed $501.5 billion), followed by 35-49 years (14.1 million owed $575.5 billion).
Repayment and default
Monthly student loan repayment in the US ranged from $200 to $299 on average. Some other sources put it at $393. Student loans were delinquent or in default (over 90 days) in the case of 11.1 percent of loans.
In the past decade, the aggregate annual net student loan repayment rate (the debt balances that comes down every year) has averaged about 3 percent.
Only a little more than half the borrowers who were supposed to start repaying loans 2010-2012 had made any progress after five years. Students who attended for-profit and two-year colleges have particularly struggled.
The Coronavirus Aid, Relief, and Economy Security (CARES) Act temporary suspends monthly Department of Education loan repayments till September 30, 2020, but borrowers can make payments if they choose. Direct federal loans quality but not Federal Family Education and Perkins loans. Interest doesn’t accrue on loans during this period.
Even earlier, employers were allowed to cover tax-free payments of $5,250 to cover tuition costs, but they are now also allowed to use the money for student-loan payments.
Forgiveness plans, such as the income-driven repayment plan, which forgives the balance of unpaid loans for those who have made monthly payments for 25 years, will stay.
The cumulative direct loans in default were $119.8 billion (as of Q3, 2019) from 5.5 million borrowers, and the cumulative direct loans in forbearance (where there is an agreement to delay the closure of the loan) $122.9 billion from 2.8 million borrowers. As many as 136,473 borrowers applied for loan forgiveness, and 1,139 received it for $71.9 million.
As for the states with the highest student loan debt, California ($135 billion from 3.8 million borrowers), Texas ($107.3 billion, 3.4 million), and Florida ($90.8, 2.5 million) topped the list because of their high populations. Connecticut had the highest average student loan debt ($38,669) per student for the Class of 2018, and Utah the lowest ($19,728).
Average credit required
No credit history or co-signor is required for federal direct undergraduate loan. If you have taken out your maximum federal loan possible, you can take out a private student loan, but you need a credit history.
Private lenders insist on a credit score of 670 or higher on a 300-850 FICO (Fair Isaac Corporation, an analytics software company, now just “FICO”) scale, which is the most widely used.
You need a co-signor if you don’t have a credit history. A few lenders don’t see the credit history but the income potential, but the loan interest rates are higher.
The average federal loan interest rates between 2006 and 2020 was 4.79 percent for undergraduate students, 6.36 percent for graduate students, and 7.41 percent for parents and graduate students taking out PLUS loans.
But rates on federal student loans were set to fall during the 2019-2020 academic year for the first time in three years.
For students availing themselves of federal loans till June 30, 2020, the rates were 4.53 percent for undergraduates, 6.08 percent for graduate students, and 7.08 percent for parents and graduate students taking out PLUS loans.
The rates for federal loans depend on the type of loans and the date when the funds were disbursed. Once a student takes out a federal loan, the interest rate is set for life, but the rates for new borrowers are fixed annually depending on the government’s cost of borrowing. Private lenders offer variable-rate and fixed-rate loans.
Federal loan interest rates are generally lower than those charged by private lenders, except private loan rates to graduate students and parents, which can be sometimes lower than fed loans. Shorter loan terms attract lower interests.
The private loan interest rate for borrowers taking out five-year variable-rate loans with a co-signor and starting payment immediately was 6.17 percent (8.86 percent without co-signor), and 10-year fixed-rate loans with a co-signor and starting payment immediately was 7.64 percent (9.75 percent without co-signor) as on May 31, 2018. In April 2019, private loan interest rates were as high as 14.24 percent.