Financial Matters: Trends in Student Loans

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You’ve probably seen the headlines suggesting that debt for college students is out of control and getting worse. But, is it really?

New data from the research arm of the College Board provide some answers. Since 1983, the College Board has analyzed data gathered from both the U.S. Department of Education and colleges to track how various forms of financial aid have changed over time. The research is published in an annual report, Trends in Student Aid, last released in October 2017.

Some key findings:

Total education borrowing has declined for six consecutive years. In the 2016-17 school year, students and parents borrowed $106.5 billion, down from $125.6 billion in 2010-11. These numbers include borrowing by undergraduate students, graduate students, and parents.

Fifty-seven percent of student borrowers with outstanding federal education loans owe less than $20,000.

Although you may have seen reports about individuals struggling to pay off $150,000 in student loans, that’s actually quite rare. In fact, the College Board found that only 12% of student borrowers had more than $60,000 in student loan debt. These numbers include both undergraduate and graduate borrowing.

Sixty percent of bachelor’s degree recipients in 2015-16 borrowed to pay for their educations. The percentage is slightly higher than in 2000- 01, when 56% of students borrowed for their undergraduate education, but it is unchanged from five years ago (2010- 11). The percentage of students borrowing at private non-profit institutions (62%) was only slightly higher than the percentage at public institutions (59%).

Of bachelor’s degree recipients who took student loans, the average amount of student debt upon graduation was $28,400 last year. That’s a 7% increase over 2010-11, when the average debt was $26,400. Among students at public universities who borrowed, average debt at graduation was $27,000 last year. Students who borrowed to attend private nonprofit colleges graduated with an average debt of $32,000. Although a specific amount wasn’t provided, the report made it clear that the average amount of debt for students attending private for-profit colleges is significantly higher than those attending either public or private nonprofit schools.

So, the real story about student loans is that it is a bit of a mixed bag. Although the total amount being borrowed by students at all levels has declined, the majority of undergraduate students continue to borrow to help pay their college expenses, and the average debt continues to slowly rise.

Of course, averages are just that: averages. They can’t predict what any individual student might end up borrowing to pay for college. If you’re concerned about student loans, there are several steps your family can take during the college planning stage to improve the odds of keeping education debt under control.

The most important strategy is to do your homework. Educate yourself about the various loans and repayment options available to both students and parents. All colleges’ websites now offer net price calculators that can help you get an early read on how much student and parent borrowing might be necessary to attend different colleges. Discuss the results as a family, and consider adjusting the final college list with an eye towards options that are likely to be the best financial fit for your family.