The Distribution of Student Loan Debt

While the topic of student loan debt has centered on recent graduates entering the workforce, the analytic lens has also focused on other groups repaying educational loans, including parents, graduate students, and those who drop out of school. The Federal Reserve Bank of New York reports that student loan debt is not evenly distributed across the general population. Research shows that 40% of people under the age of 30 have student loan debt; for those between the ages of 30-39, 25% show outstanding student loan debt. Only 7.4% of Americans over 40 are repaying student loans. However, the distribution of debt varies. The average student loan debt is $23,300. The highest average, $28,500, is carried by those between the ages of 30-39, followed by those in the 40-49 age range with an average of $26,000.

Across the board, about 27% of student loans are considered delinquent, having at least one past due payment. Borrowers who drop out before graduation are four times more likely to default on their loans, according to the Education Sector. The independent think tank on education policy also reports that 30% of borrowers who started college in 2003 dropped out within six years, up 7% from those who started in 1995. That equates to roughly 36 million Americans who have acquired student loans without earning a degree, making it even more difficult to repay outstanding debt.

Graduates have also felt the crunch. Over the past decade, tuition costs have increased to approximately $32,000 for four years at a state university and $83,000 for a private school. Over the same period, the average earnings for a recent graduate with a bachelor’s degree fell by nearly 15%.

With the federal government providing the majority of student loans, increased delinquency rates are concerning. Lawmakers have proposed legislation to lift the 2005 congressional ruling that prohibits student loan forgiveness under bankruptcy for private loans. The proposal excludes federal loans, which, if included, would shift the burden to taxpayers. For now, Congress is considering an extension to the 3.4% interest rate freeze for federal loans. Without legislation, the rate is expected to double starting July 1.




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