Outstanding student loan debt is at an all-time high. In 2018, the total amount of student loan debt hit a record $1.52 trillion and there are over 44 million borrowers in the country.
That means there are a lot of us trying to understand and navigate the student loan landscape. How much are we borrowing? And what can we do to decrease the amount we owe?
The College Board found that cumulative debt levels upon graduation—meaning the debt students had accumulated over the four years of undergrad—had risen to $28,500 per borrower for those graduating in 2016 (the latest stats available). And nearly 60% of all graduates carried student loan debt.
How Average Student Loan Debt Has Changed in the Last 10 Years
It’s no secret that college is expensive and has only gotten more expensive in the last 10 years. According to the Consumer Price Index , the cost of attending college increased by 62.7% from 2006 to 2016.
Over roughly that same period of time (from 2007 to 2017), total outstanding student loan debt grew from $545 billion to $1.47 trillion in order to cover those costs. This student loan debt crisis is taking a financial toll on graduating students, potentially affecting their credit and home-buying prospects.
There is good news, though: the growth of student loan debt is slowing. While the average student loan debt continues to grow slightly, it’s leveled off in recent years. The average cumulative student debt rose a small amount from $29,384 in the 2011 to 2012 school year to $29,669 in the 2015 to 2016 school year—about 1%—as reported in a comprehensive study conducted by the National Postsecondary Student Aid Study.
However, cumulative Parent PLUS loan debt, for that same four-year period from 2011-12 to 2015-16, rose from $27,352 to $32,596 (about 19%). As the amount of debt taken on by students has slowed, the amount of debt taken on by parents continues to rise. A different analysis suggests that students are hitting the maximum borrowing limit for certain federal loans, and in turn, parents (especially at high-cost universities) are picking up the slack.
Public vs Private Student Loan Debt
The College Board’s annual survey of trends in student aid 2018 found that students at public schools who borrowed money had an average college debt of $26,900 after four years, compared to private school borrowers, who graduated with an average debt of $32,600.
It should be noted that numbers for for-profit schools are harder to come by, but what is true across analyses is that students at for-profit schools take out more in student loans and default at higher rates. Of students at for-profit colleges, 88% take out student loans and borrowers graduate with an average of $39,950 in college
Undergraduate vs Graduate Student Debt
Let’s look at this from a different angle. How does undergrad debt compare to grad school debt? The College Board’s annual survey of student aid trends found that on average, undergraduates took out $4,510 in federal loans in the 2017 to 2018 school year. That same year, graduate students took out $17,990 in federal loans.
While there are no studies that compare the average undergraduate debt of an Engineering grad with the average debt of a Sociology major, the average student debt for a bachelor’s degree is $28,650. But if you are planning to get an advanced degree, prepare for a potential mortgage-sized debt load.
As an example, people with law degrees have an average of $122,158 in debt , according to the most recent figures available. Looking to fix teeth for a living? Dentists graduate school with $237,791 in debt.
A New America study found that people who get Master of Arts degree have an average of $58,539 in debt while those with a Master of Science have and average of $50,400 in debt. Want to get a Master of Education? You may have about $50,879 in debt when you graduate.
Want to be a business superstar with an MBA? That can set you back $42,000 on average.
Average College Debt by State
When we look at the average student loan debt broken down by school and region, it also becomes clear there is a range of highs and lows across the country.
The Institute for College Access and Success (TICAS) puts together a comprehensive report on national student debt, using numbers self-reported to college guide publisher Peterson’s from thousands of colleges and universities.
The numbers reported by schools vary—with average debt among graduating students ranging from $4,600 to $59,100—but it does allow for a geographic look at the average student loan debt by state .
The highest debt states in 2016, the last year for reported numbers, were New Hampshire ($36,367), Pennsylvania ($35,759), and Connecticut ($35,494). The states were college graduates had the lowest average debt were Utah ($19,975), New Mexico ($21,373), and California ($22,744).
Generally, students take out more in student loans when other available resources, like grants, scholarships, or savings, don’t cover the cost of college. According to TICAS, the states where lower-income students, who typically have fewer family resources, had more challenges paying for school were also the states with higher levels of student debt.
How Long it Takes to Pay Off Student Loans
But even as the growth of new student loan debt is slowing, there continue to be outstanding student loan amounts that haven’t yet been paid off—which helps to explain why the total loan balances are hitting record highs.
There are a few other options that extend the repayment term or allow you to repay on an income-driven plan. Many graduates take longer than 10 years to pay back their loans, and around 20% of students default on their loans.
There isn’t a lot of data on exactly how long it takes students to pay off their student loans, partially because it varies based on how big your loan amount is and partially because some numbers count consolidation as loan repayment—when in reality you’ve taken out a new loan with different terms. One Wisconsin Institute , which surveyed borrowers in 2013, found that undergraduates took 19.7 years on average to pay off their student loans and graduate students took 23 years.
But you should know: the sooner you pay off your loan, the more you save in the long run because you aren’t paying interest for as long. Part of the reason so many students struggle to make payments is that their student loan payments are large in comparison to their incomes.
The interest rate can be a big factor in that. While interest rates on federal student loans are fixed and set by the government, interest rates on private student can range from 3% to 14%. Use our student loan calculator to figure out how your monthly payments could change at different interest rates.
Percentage of Income Going to Repayment
Wondering how much of your paycheck is being carved out to repay that Biology textbook you diligently read and highlighted as a Freshman?
With all the doom and gloom around student loan repayment, it might make you feel better to know that, according to an analysis by the Brookings Institute , 75% of borrowers put under 7% of their monthly income toward their student loan repayment or an average of $242 per month. In addition, 50% of households paid less than $160 toward their student debt.
Refinancing Your Student Loans with SoFi
If you’re looking for options to manage your student loan payments, consider refinancing your student loans. When you refinance, you take out a brand new loan. Lenders review your credit history and earning potential (among other financial factors) to determine your new, hopefully lower, interest rate.
If you qualify to refinance your student loans with a private lender, you may also be able to adjust your repayment term. If you extend the term you could have lower monthly payments but may end up paying more in interest over the life of the loan. Those who want to continue to take advantage of federal loan benefits like income-based repayment may not want to refinance with a private lender, simply because you lose all federal student loan benefits when you refinance.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.