Student loan debt plays a significant role in the lives of many Americans. The cost associated with higher education continues to increase year over year, and for many, this translates to a heavier reliance on loans to bridge the gap. Consequently, outstanding U.S. student loan debt reached $1.6 trillion at the end of 2019, according to the Federal Reserve — an all-time high.
Student loan debt is projected to keep growing, but its impact on borrowers differs depending on circumstance. Factors such as job prospects by major or state-by-state wages play a role in how long borrowers take to repay their debt.
Now more than ever, students, parents, policymakers and politicians are paying closer attention to student loan debt. The CARES Act, which was passed on March 27, 2020, suspended all payments for certain types of federal student loans until September 30, 2020, and the following executive memo issued by the president on August 8 extended the interest-free suspension on federally backed student loan debt through the end of the year. While interest will not accrue on federal loans during this time period, these extensions do not apply to private student loans.
Although consolidating and lowering student loan payments is a good idea for any borrower, those with private student loans, especially, might want to take the time to consider if a refinance — or even the use of a personal line of credit — can help them save more and get out of debt faster.
When considering your options, it helps to get a look at the big picture. Here’s a snapshot of student loan debt in the United States today.
Key 2019 student loan debt statistics
- Student loan debt national average: $32,731
- Top five states by student loan debt: Connecticut, Pennsylvania, New Hampshire, Rhode Island and New Jersey
- Top five majors with the highest earnings-to-debt ratio: Physical Sciences, Computer Engineering, General Engineering, Chemical Engineering and Computer Science
- Age group with the highest rate of student loan debt: Adults ages 18 to 29 (34% have student loan debt)
National average of student loan debt in the United States
More than half (69%) of seniors who graduated with a four-year degree in 2019 had student loan debt, owing an average of $32,731, according to the National Conference of State Legislatures. However, there are nuances to that average amount.
Research from The Brookings Institution shows that the 6% of borrowers who owe more than $100,000 in student loan debt — including the 2% owing more than $200,000 — account for a third of all outstanding student loan debt.
The vast majority of those borrowers who owe more than $100,000 took out loans for graduate school. Loans associated with grad school account for about 50% of total outstanding student loan debt (and 25% of total borrowers). The other half belongs to the 75% of borrowers who took out loans for two- or four-year degrees.
First-generation college students tend to take out undergraduate student loans more often and in higher amounts than their peers — with 42% of recent first-gen college graduates taking out $25,000-plus compared to 35% of continuing-generation grads.
On the other end of the spectrum, 18% of borrowers owe less than $5,000 in student loan debt, a full 30% of all bachelor’s degree recipients leave school with no debt, and another 23% graduate with less than $20,000 in loans, according to The Brookings Institution.
With student loan debt growing for graduates year after year, many borrowers look for ways to lower their overall monthly burden. Taking out a personal line of credit allows you to combine multiple student loan payments into one monthly payment and potentially save you money by lowering the overall interest rate on the bulk of the loan — as does a traditional student loan refinance.
But there are other advantages to a personal line of credit. For instance, the flexibility of a personal line of credit allows you to borrow as much as you need from a set amount of money. Then, if you’re able to pay back the money within your draw period, that amount would be available to you to use for additional financial needs.
Keep in mind that by refinancing your student loan debt, you may permanently lose special student loan benefits such as forbearance, deferment and income-based repayment. However, refinancing student loans could still save you money in the long term. Learn more here about how a personal line of credit works, and how it might help you lower your overall student loan costs.
Top five states
Borrowers incur the highest average student loan debt by state in the Northeastern United States, according to research from The Institute for College Access & Success. Average student debt at graduation ranges from $19,750 in Utah to $38,650 in Connecticut. New graduates’ likelihood of having student loan debt varies greatly from state to state, ranging from a 36% likelihood in Utah to 76% for residents in New Hampshire.
Highest average student loan debt by state
- Connecticut: $38,669
- Pennsylvania: $37,061
- New Hampshire: $36,776
- Rhode Island: $36,036
- New Jersey: $34,387
Across all five states, borrowers’ monthly payments exceed the nation-wide typical monthly payment of $200 to $299, according to the Federal Reserve.
Top five majors
Average student loan debt by major varies, but investing in one’s education correlates with higher earnings. In 2019, for example, median weekly earnings for bachelor’s degree earners were $1,248, compared to $746 for high school diploma earners, according to the Bureau of Labor Statistics. Pay tends to be higher for doctoral and professional degrees, as well.
On the path to achieving those full-time earnings, some courses of study carry a higher price tag, attributed primarily to the type of school (public, private, for-profit, two-year or four-year) rather than the program itself. Research shows that student loan debt is similar across majors, though the share of earnings necessary for loan repayment varies substantially across majors.
Earnings-to-debt ratio is a helpful calculation when comparing undergraduate courses of study with the most financial value — found by factoring student debt rates and early-career wages. Unsurprisingly, majors in STEM-related fields make up the top five majors with the highest earnings-to-debt ratio:
- Physical Sciences
- Computer Engineering
- Chemical Engineering
- Computer Science
Age range with the most student loan debt
Over a third (34%) of adults ages 18 to 29 report carrying some level of student loan debt, making them the largest group of borrowers in the United States. Among those with a bachelor’s degree or higher, the rate with student debt rises to 49%. Roughly one in five adults (22%) ages 30 to 44 have student loan debt, compared to 4% of those 45 and older.
As one may expect, the number of adults over the age of 30 with student loans is much lower. They’ve typically had more time to pay down their balances and tend to be further out from their school years. However, borrowing trends have had an impact as well. Recent data shows that around 60% of college seniors took out loans for their education in the 2015–2016 school year, roughly 10% more than in the 1999–2000 school year.
Student loan debt repayment
The standard repayment timetable for federal loans is 10 years, but borrowers’ actual timetables are dependent on the type of loan product, any deferment or forbearance plans and refinancing. Note that the debt amount does not directly impact the repayment period. Generally, borrowers who graduate are more likely to pay their loans off (and do so on time).
Research shows that school type, labor market outcomes and repayment plan choices — among other factors — all influence repayment. For example:
- Borrowers at for-profit institutions and public two-year community colleges repay a lower fraction of their initial repayment balance three years after entering repayment — 3% and 8% less, respectively — than borrowers at four-year private institutions.
- Borrowers at four-year public colleges tend to repay their balances at a slightly faster rate than those at four-year private institutions. Higher family income and earnings also correlate with faster loan repayment.
The country’s outstanding student loan balance is widely projected to reach $2 trillion by 2022, due to both slow repayments and new borrowing. Research that looked at borrowers with repayment obligations beginning in 2010–2012 found that only 51% had made progress toward cutting their outstanding balances five years later.
High monthly payments are typically to blame when it comes to delays in paying down balances. Current figures average close to $400, up dramatically from the $227 average monthly bill back in 2005. The significant expense can make it difficult for student loan borrowers to budget for other important personal goals and landmarks — such as upgrading a car, starting a family or buying a home.
Refinancing student loans or using a personal line of credit to consolidate and lower monthly payments can help make those goals, and many others, more achievable for borrowers. If you’re interested in learning how a personal line of credit might work for your own particular financial scenario, a personal line of credit calculator can help get you started.