Average student loan debt has been on the rise as families try to keep up with soaring college costs. Though 2022 college graduates who borrowed to pay for school took out, on average, $302 less in loans compared with the prior year, the average total student debt continues to hover near $30,000, according to U.S. News data.
Data reported to U.S. News by 1,012 colleges in an annual survey showed that graduates from the class of 2022 who took out student loans en route to a bachelor’s degree borrowed $29,417 on average. That’s about $2,200 more than borrowers from the class of 2012 had to shoulder, representing a roughly 8% increase in the amount students borrowed over that decade.
The average debt of graduates varies based on institution type, per U.S. News data. Those who graduated in 2022 from a ranked private college borrowed more on average, at $23,627, than public college graduates, who took out $20,371.
“Private and public colleges are funded pretty differently,” says Amber Miller, a partner experience manager at GreenPath Financial Wellness. “Public colleges typically receive funding from tax dollars to help offset some of the costs that would need to be made up by students through tuition. But private colleges are predominantly receiving funding through donations or endowments. And more of it comes from those tuition dollars, which leads to those private schools having higher tuition costs because more of the expenses need to be made up through that.”
However, a smaller percentage of students are borrowing money to pay for college. In 2009, about 68% of college graduates had taken on student loan debt, while in 2022, 61% of graduates had borrowed, per data reported to U.S. News.
The average total student loan debt, which includes both federal and private loans, jumped more than $5,500 from 2009 to 2015, but in recent years the average amount borrowed has stabilized.
Factors That Lead to Student Loan Borrowing
Borrowing is often tied to the cost of college tuition and fees, which, per U.S. News data, has more than doubled over the last 20 years across ranked private and public National Universities (schools that are often research-oriented and offer bachelor’s, master’s and doctoral degrees).
“As tuition and living costs have just been on the rise pretty consistently and have really ballooned, many students have had to turn to student loans versus being able to really work their way through school, like past generations may have been able to do,” Miller says. “Or (they) have not been able to rely on scholarships to cover all of their costs as those costs have continued to rise.”
That rise in tuition and fees continued for the 2023-2024 academic year, with private National Universities increasing those costs on average by about 5% from the previous year. In-state tuition at public National Universities increased by 3%, compared with a hike of 1.5% in 2022-2023 from the prior year for public university out-of-staters.
When adjusted for inflation, in-state and out-of-state tuition at public National Universities actually decreased by 0.3% and 2.5% between 2022-2023 and 2023-2024. Private tuition and fees, on the other hand, still increased, but by 1% over the last year.
“Realistically, particularly at tuition-driven schools, they have to raise tuition to keep up with their own costs,” says Stacey MacPhetres, senior director of education finance at EdAssist by Bright Horizons. “It makes the student debt crisis a greater endeavor, but I’m not surprised that we are seeing tuition rising. We have seen some schools freeze tuition or go with a standard four-year tuition rate that will sort of stabilize. But by and large, we are seeing more increases.”
How Does Debt Affect Borrowers?
Student loans are a significant burden for many Americans, especially when inflation rises significantly or during an economic recession. National student loan debt was almost $1.57 trillion in the second quarter of 2023, although it declined by $35 billion from last quarter, according to a quarterly report by the Federal Reserve Bank of New York issued in August 2023.
This debt often has a major impact on the quality of life for those who take out loans to pay for college, especially for borrowers who go into default, experts say. Defaulting technically occurs after more than 270 days of overdue payment, leading to potential legal implications and lost eligibility for further federal student aid.
“Defaulting on student loans affects your credit in a negative way,” says William Boffi, vice president of enrollment management at Assumption University in Massachusetts. “There’s a lot written about student loan debt hampering young peoples’ ability to hit other milestones, like borrowing for a house and stuff like that. And I think that becomes more true when students go into default and the credit is affected more than just the fact that they have debt.”
The rate of loan defaults is higher among Black and Hispanic borrowers. A 2020 Student Borrower Protection Center study, for example, found that the default rate in the U.S. was nearly twice as high in majority-Black ZIP codes – 17.7% – than in majority-white ones, where it was 9%. Majority Hispanic ZIP codes fell between those default rates at 13%.
In the wake of financial challenges caused by the coronavirus pandemic, the federal government provided temporary relief to many federal student loan borrowers. In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act, which suspended most federal student loan payments, waived interest and halted collections on defaulted loans through September 2020. After multiple extensions, repayment is set to resume in October 2023.
However, nearly half of borrowers aren’t financially prepared to resume their student loan payments, according to a July 2023 survey by U.S. News. Borrowers who didn’t obtain a degree were most likely to say they’re not ready for repayment, with 69% of them responding that way. Comparably, 35% of borrowers with a master’s degree or higher shared that opinion.
“If people are stressed about these payments resuming or maybe they just left school in the past few years during this payment pause and they’re getting ready to start their first payment, the one thing that I want people to know is that they’re not alone and they do have options,” Miller says.
She advises borrowers to use the U.S. Department of Education Federal Student Aid’s Loan Simulator, which allows federal student loan borrowers to compare their repayment plan options side by side.
“You may be eligible for a zero dollar or a very low monthly payment on an income-driven repayment plan, like the new SAVE plan that’s just rolling out,” Miller says. “If not, communicate with your loan servicer to determine your eligibility for other options like a deferment or a forbearance. They can give someone a little bit more time to get their ducks in a row. I do just want to reiterate, however, that communication is key.”
As prospective students start thinking about college, experts says they shouldn’t let fear of debt stop them from attending – especially if they are from a low-income household.
“I think the message that a lot of families get is that all student loan debt is bad,” Boffi says. “And I think that’s a really dangerous message because it is the majority of families that need to take on loan debt in order to make the college education accessible. And I think at most institutions and most bachelor’s degree institutions, especially liberal arts institutions, the return is super clear.”
“If you earn that degree, that debt is going to be worth it,” Boffi says. “If you don’t, then it’s going to be a heavy burden for you to carry around. So commit to completing that degree even if it means stopping out and starting back up again.”
Trying to fund your education? Get tips and more in the U.S. News Paying for College center.