What Is the Average Student Loan Debt?

Is There a Student Loan Debt Crisis?

According to debt.org, the average student loan debt has been on the rise for the last 18 years and shows no signs of stopping. Reportedly, the total amount owed in student loan debt has doubled in just the last eight years.

In considering if the state of student loan debt is a crisis, it is important to consider how this kind of debt affects borrowers.

The burden of student loans can affect a person for many years and may change the trajectory of their life. Though college graduates make an average of $1.3 million more over the course of their lives than with just a high school degree, the cost of student loans can be crippling.

Reportedly, how someone handles student loans can affect their credit score, budget, and ability to take out other loans for something like a car and a home. Debt.org asserts that student loans are one reason why millennials are getting married later than those in previous generations. Additionally, student loan debt may also hamper a borrower’s ability to start their own business and weather the costs of entrepreneurship.

In addition to the cost itself, misconceptions about loans are part of the student loan debt crisis. These misconceptions can lead borrowers to make major financial decisions that they may not fully understand. This is particularly the case as borrowers are often teenagers, trying to fund college for the first time.

There is a common belief that student debt is “good debt” — better than credit card debt, that is. However, debt.org stresses that it is only good debt if you can pay it back easily. The site explains that a manageable amount of debt is usually considered to be not more than one’s first-year salary.

Some borrowers may believe that they can simply declare bankruptcy to have their loans forgiven, but according to debt.org, this is not the case. In reality, it is rare for either federal or private loans to be forgiven because the borrower declares bankruptcy.

There are several hurdles a student loan borrower must clear before being able to have even some of their student loan discharged through bankruptcy.

According to the U.S. Department of Education, a borrower who declares either Chapter 7 or Chapter 13 bankruptcy must also demonstrate that the repayment of the loan would impose an “undue hardship” on them and their dependents.

Demonstrating undue hardship requires that specific conditions be met: that the borrower is unable to maintain a minimal standard of living, the hardship will continue for a good chunk of the loan repayment period, and the borrower has previously made good faith efforts to repay the loan before they tried filing for bankruptcy.

Even in successful cases of filing for bankruptcy and demonstrating undue hardship, many borrowers find that their loan is not entirely discharged. Others still find that their loan is not discharged, but the terms of the loan may be changed, such as offering a lower interest rate for the borrower.

Indeed, while declaring bankruptcy can help some with their student loan debt, it is not a simple matter, and does not always—or even often—succeed.

What Is the Average Student Loan Debt?

In 2017, the average student loan debt was $37,172. In total, there is $1.4 trillion owed for student loan debt in the United States and 30 percent of all borrowers will have more than $30,000 in debt when they graduate with an undergraduate degree.

These high debts are in part due to the rising costs of tuition at both private and public higher education institutions. According to debt.org, this increase is out of step with general inflation rates. Reportedly, tuition has risen 344 percent since 1980 — from $2,119 to $9,410. At private colleges, tuition has risen 241 percent since 1980, from $9,500 to $32,410.

Debt.org contrasts these numbers with inflation of food and electricity costs, which have risen 150 percent since 1980. Reportedly, gasoline prices rose over 200 percent since 1980.

What Is the Average Student Loan Debt Monthly Repayment?

Because the average student loan debt is $37,172, and the standard repayment plan is a ten-year plan borrowed at a 4.29 percent interest rate, the average student loan debt monthly repayment is $382.

According to debt.com, a person would have to make $47,000 to be able to make the payments. If a person is married, they would need to make $52,000 as a starting salary to pay off the debt, says debt.com.

It is possible to pay less each month by extending the length of the loan. These options are called Income-Based Repayment or Pay As You Earn plans. However, you will end up paying a much higher interest rate in total.

The kind of loan you take out will affect how much you pay per month. Private loans may come with higher interest rates than federal ones.

When considering your student loan options, it is often not possible to simply pause your monthly student loan payments without consequences. Investopedia explains that borrowers can put their loans into forbearance to temporarily pause payments. Interest does continue to grow on loans placed in forbearance. Usually, loans can be put into forbearance for around 12 months.

Investopedia advises borrowers who are struggling financially to consider deferring their loans or implementing an income-driven repayment plan instead of going into forbearance. Nerd Wallet elaborates on these two options, explaining that while forbearance continues to increase the amount you owe through interest, deferment can be free from interest.

Forbearance if often useful if a financial hardship is temporary, and can be used if you do not quality for deferment. In contrast, deferment is often used when a borrower is facing a significant, longer-term financial difficulty, such as unemployment.

Filing a Lawsuit

If you have already filed for bankruptcy but still have student loan debt to deal with, you may be able to join a class action lawsuit. Filing a lawsuit can help you potentially discharge your student loan debt.

Pursuing litigation can be a daunting prospect, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

Join a Free Student Loan Lawsuit Investigation

If you filed for bankruptcy and did not include your student loan debt, you may qualify to join this student loan debt lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.