The latest student loan debt statistics show that student loan debt totals $1.75 trillion as of April 2022.

Higher education represents a path to financial prosperity and opportunity for millions of Americans. But, due to rising college costs, many students find it necessary to finance higher education with student loans. Unfortunately, some borrowers find it difficult to pay back their hefty debt upon graduation.

The cost of college has steadily increased over the last 30 years. In that timeframe, tuition costs at public four-year colleges grew from $4,160 to $10,740 and from $19,360 to $38,070 at private nonprofit institutions (adjusted for inflation). As costs have risen, so has the need for student loans and other financial aid forms.

When considering your options, it helps to look at the big picture and understand the full impact and scope of student loans. This is a snapshot of student loan debt in the United States in 2022.

Average Student Loan Debt

• $1.75 trillion in total student loan debt (including federal and private loans)
• $28,950 owed per borrower on average
• About 92% of all student debt are federal student loans; the remaining amount is private student loans
• 55% of students from public four-year institutions had student loans
• 57% of students from private nonprofit four-year institutions took on education debt

Here’s how that debt breaks down by loan type.

Federal Student Loan Portfolio

Federal student loans make up the vast majority of American education debt—about 92% of all outstanding student loans are federal debt. The federal student loan portfolio currently totals more than $1.6 trillion, owed by about 43 million borrowers

Federal Student Loans by Age

Unsurprisingly; younger people hold the majority of student loan debt. Borrowers between the ages of 25 and 34 carry about $500 billion in federal student loans—the majority of people in this age group owe between $10,000 and $40,000.

However, people carry their education debt well into middle age and beyond. Borrowers ages 35 to 49 owe more than $620 billion in student loans. This cohort has the highest number of borrowers who owe more than $100,000 in loans.

Even retirees feel the pressure from student loans; 2.4 million borrowers aged 62 or older owe $98 billion in student loans.

Student Loan Repayment Statistics

Here are the current repayment statuses of the federal Direct Loan program.

Individual student loan debt statistics

Here’s how student loan debt in the U.S. impacts individual borrowers:

• The age group with the most student loan borrowers is the 25 to 34 age bracket, while 7.4 million borrowers are 24 years old or younger.
• In the class of 2020, 55 percent of bachelor’s degree recipients graduated with student loan debt.
• In 19 states, the average student loan debt was over $30,000 for the class of 2020, and it was over $35,000 in six states.
• As of March 2021, 54 percent of borrowers owed less than $20,000 in student loans, and 10 percent owed $80,000 or more.
• The average estimated budget for undergraduates for the 2021-22 school year was $18,830 for public two-year in-district students, $27,330 for public four-year in-state students, $44,150 for public four-year out-of-state students, and $55,800 for private nonprofit four-year students.

Student debt and mental health

Student loan debt can significantly impact a borrower’s mental health. Feelings of anxiety and stress may coincide with any long-term debt, especially if the debt impedes the ability to meet critical financial milestones, like saving for a house or buying a car.

• Taking on too much student loan debt is the biggest financial regret of 10 percent of Americans.
• Forty-two percent of adults and 33 percent of Gen Z reported in 2018 that personal debt, including student loans, is a significant source of stress.
• The financial pressure of student loan payments can lead to stress, anxiety, and depression.

Student loan debt by degree

Advanced degrees are expensive, but the investment could pay off. Here’s what you need to know before taking out graduate student loans, according to the Brookings Institute and MeasureOne:

• Around 25 percent of all undergraduates graduate with less than $20,000 in student loan debt; borrowers who leave school with more than $57,500 have almost always borrowed for graduate school.
• About 25 percent of all student loan borrowers went to graduate school.
• Graduate students account for roughly half of the total outstanding student loan debt in the U.S.
• Those who earn an advanced degree may earn a larger annual income and have increased job security.
• Graduate students are less likely to fall into delinquency with private loans; 2.3 percent of undergraduate balances in repayment are at least 30 days delinquent, while 1.65 percent of graduate balances in repayment are at least 30 days delinquent.

Flexible Financing Could Be a Good Option For You

Under Flexible Financing Like Income Share Agreements; students have more options in higher education because they aren’t limited by finances.

 Because their future funding is dependent on graduates securing paid employment, many schools may offer job search assistance. This helps students feel secure when they are picking a school or program because they won’t have to make payments until they secure a job. 

Schools have little incentives to help graduates find a good-paying job post-graduation under traditional loans because their payments are not tied to the student’s income. A lender will likely have already paid them for your tuition. 

An alternative to traditional private student loans in America is long overdue. We believe flexible Financing is that change.

Sources

• Zippia
• MeasureOne
• Student Loan Hero
• Lendedu
• Student Loan Planner
• First Republic
• Federal Reserve
• The Institute for College Access and Success
•  College Board
• MeasureOne

Attending college can be difficult for many students to afford without financial assistance. With even a semester of community colleges costing thousands of dollars these days, college affordability often makes a big difference in which college you’re able to choose. Thankfully, there are several higher education loan options out there to help you pay your college bills, including scholarships, federal aid, and Income Share Agreements (ISA).

Today, we’re going to focus on federal loans. The federal loan program is robust and offers many different types of student loans. The regulations surrounding federal student loans can differ for each one as well. Though specific eligibility requirements vary, you could qualify for one or more of the following types of federal student loans for college or graduate school. But before you sign on the dotted line, it helps to know the differences between your loan options.

Below are the different types of student loans you might encounter and which one could potentially be the best fit for you.

1. Direct subsidized federal loan

These loans are for students with demonstrated financial need. The fixed interest rate for these loans is pretty low at (as of 2020) 4.53%. Similar to many other federal financial aid, the interest rate is fixed, which is especially great if you lock it in at a low rate. But, since you have to apply for a new loan every year, and the percentage does change from year to year, the rate you get on your freshman year loans will likely be different from the rate on your senior year loans.

With subsidized federal debt, the Department of Education will cover the interest that accrues on your loans while you’re enrolled at least half-time in school. For example, one year of interest on a $5,500 loan would be $277 for a class of 2019 college freshmen. If you qualify for a subsidized direct loan, the government will take care of that interest for you.

The schools to which you’ve been accepted will then detail the amount you can borrow in your college award letter.

Interest rate: 4.53% for undergraduates (2019-20 Rate)

Aggregate loan limit: $23,000 for undergraduates

Loan fee: 1.059% (Through Sept. 30, 2020)

Terms: 10 to 25 years

2. Direct unsubsidized federal loan

Unlike subsidized federal loans, a direct unsubsidized loan is also for graduate and professional students, not only undergraduate students, and loan eligibility is not based solely on financial need or merit. They’re useful if you just don’t have quite enough money on hand to pay for school but don’t qualify for financial need by government guidelines. Almost everyone is eligible for this federal student loan, as long as they’re enrolled at least half-time in school.

With unsubsidized loans, you’re on the hook for accruing interest while you’re enrolled, as well as during a grace period or while in deferment or forbearance. What’s more, the interest capitalizes when it goes unpaid, meaning that it will be added to the principal of the original loan amount.

Interest rate: 4.53% for undergraduates, 6.08% for postgraduates (2019-2020)

Aggregate loan limit: $31,000 to $57,500 (depending on your dependency status) for undergraduates, $138,500 for graduates

Loan fee: 1.059% (2019-2020)

Terms: 10 to 25 years

3. Direct Grad PLUS loan

PLUS loans, whether they’re for graduate students or parents, are unique in that they require the applicant to undergo a credit check. The Direct Grad PLUS loan, specifically, was built for graduate and professional students who have had more time to improve their credit score (unlike undergraduates entering college, who might have never held a credit card).

If you’re trying to qualify for PLUS loans but have an adverse credit history, enlisting a creditworthy cosigner can help your case. Grad PLUS loans also give the student loan borrower six months after they finish or leave school to begin making payments.

During any period when you’re not required to make payments, interest will accrue on your loan. You may choose to pay the accrued interest or allow the interest to be capitalized (added to your loan principal balance) when you have to start making payments. Your loan servicer will notify you when your first loan payment is due.

Interest rate: 5.30% (after July 1, 2020, and before July 1, 2021)

Aggregate loan limit: The cost of attendance minus any other financial aid

Loan fee: 4.236% (for loans disbursed Oct. 1, 2019, and Oct. 1, 2020)

Terms: 10 to 25 years

4. Direct Parent PLUS loan

This loan type is for biological, adoptive, and step-parents to support their dependent undergraduates.

A key difference between Parent PLUS loans and other types of loan options is that parents are expected to make payments while their children are in school, though they may request deferment during the loan application process.

The government does not offer a way for parents to transfer a PLUS loan to their children, but some private lenders do allow you to refinance a Parent PLUS Loan in a child’s name.

Interest rate: 5.30% (2020-2021)

Aggregate loan limit: The cost of attendance minus any other financial aid

Loan fee: 4.236% (2020-2021)

Terms: 10 to 25 years

5. Direct Consolidation Loan

Consolidating any of the federal student loan types above allows graduates (or dropouts) to pool multiple loans into a single loan with a single loan servicer. This means you can make a single monthly payment, too.

That payment would also likely be lower than your past loans, as the repayment period can be extended up to 30 years.

Although consolidation is convenient, it’s not right for everyone. It might give one borrower access to income-driven repayment options, but it might erase another’s progress toward Public Service Loan Forgiveness.

Before deciding to consolidate, it’s critical to consider your own situation.

Interest rate: The weighted average of the interest rates on your existing loans.

Loan fee: n/a

Terms: Up to 30 years

Federal Student Financial Aid and the FAFSA

Am I eligible for Federal Student Aid?

In order to be eligible for federal student aid there are several requirements you must meet. Including:

• Financial need
• Being a U.S. citizen or an eligible noncitizen
• Remaining in good standing on any federal student loans you already have
• Being in or accepted for an eligible degree or certificate program
• Maintaining adequate academic progress
• Review the rest of the eligibility requirements here.

How do I apply for Federal Student Aid?

Many states and colleges use the FAFSA for their financial aid programs. You can find grants and scholarships, student loans, and work-study programs through Federal Student Aid (FSA) to help pay for college or career school. Use the Free Application for Federal Student Aid (FAFSA) to access them. The federal deadline for the 2020-21 school year is June 30, 2021.

Create an FSA ID account if you’re going to submit your FAFSA online or track its status online. If you’re going to submit a paper FAFSA by mail and won’t be tracking its status, you won’t need an FSA ID.

Do I need a Cosigner?

Finding a cosigner for student loans can be tough but you almost never need a cosigner for federal student loans. There is one exception though, if you are a graduate student or parent applying for direct PLUS loans and have a poor credit history, you may not be eligible without an “endorser,” who is similar to a cosigner. So, if you find an endorser who does not have an adverse credit history, you can receive a direct PLUS Loan.

How do I check the status of an application?

You can check the status of your FAFSA by going to fafsa.gov and logging in. You can also check by contacting the Federal Student Aid Information Center.  You can also visit the FSA Contact Us page for a detailed guide listing phone numbers and other ways to reach experts about federal student aid, student loan forgiveness, FAFSA, loans and loan consolidation, and more.

What if I’ve Exhausted all my Loan Options? 

Federal loans were established to help low to no credit borrowers afford the rising costs of college. But take the time to consider each of these different loans before deciding which one’s best for you – and only you.

If you’ve exhausted your federal loan options and need additional financing, an Income Share Agreement (ISA) could be a great option for you.

If you like the idea of an ISA – is a way of borrowing less traditional private student loans – check out these schools that offer ISAs! Although this list is not extensive, if none of these schools line up with your plans, check out our student’s page for a list of even more schools.

An ISA is a terrific tool to consider as you pursue higher education. Although it can be a wonderful option for many students, it’s not the right path for every student.

Run the numbers to ensure your projected salary won’t leave you paying more under an ISA than you would have paid to borrow traditional federal and private student loans. Ensure too that you’re okay giving up some forgiveness and assistance options that you would have gotten with federal loans. It depends on the terms offered by the ISA program.

An ISA can also be an excellent solution if your school isn’t eligible for federal loans, doesn’t work with reputable private lenders, or you want to have education protections throughout paying back your outstanding student loan debt.

Choosing your financial aid is an important decision; think about where you want to be when you graduate, specifically what career you’re thinking about, and make sure to do your research before deciding on one.

Interested in learning more about Income Share Agreements or how to fund your education with one? Check out more on the Meratas blog.